The Cochlear (ASX:COH) share price has bounced back from the pandemic. Are there more gains to come?

Cochlear shares have risen a long way over the past two years. Let’s take a look at what the future might hold.

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Key points

  • The Cochlear share price has risen since the COVID crash, are more gains on the way?
  • Broker Citi currently rates the business as a buy
  • Cochlear points to a large, untapped market that could help long-term growth

The Cochlear Limited (ASX: COH) share price has recovered most of its lost ground over the past couple of years. It’s almost back to where it was before the COVID-19 pandemic hit the world.

Cochlear describes itself as a leader in implantable hearing devices that help to restore hearing and connect people to a world of sound.

Is the Cochlear share price going to keep rising?

No one has a crystal ball that can say exactly what share prices are going to do next.

However, analysts can estimate what they think a business is worth and the direction a share price is headed.

Citi is one of the latest brokers to give an updated opinion on the business.

The broker has a buy rating on Cochlear shares with a price target of $235. That implies a possible upside of around 5% over the next 12 months.

Citi has noticed the recent ASX share market volatility. The prospect of interest rates going up as well as the Russian invasion of Ukraine has caused a pullback on the Cochlear share price.

However, the reason for optimism about the ASX healthcare share is COVID-19 impacts subsiding could mean a boost for Cochlear.

Analysts at Morgans also expect the company’s positive performance over the last 12 months to continue in coming years. Morgans has an add rating and a $233.20 target on the Cochlear share price.

Cochlear’s recent growth and outlook

In the recent FY22 half-year result, the company reported that Cochlear implant units increased by 7% to 18,598 with sales revenue growing 10% to $815.3 million. Cochlear said there was strong demand for sound processor upgrades and new acoustic implant products.

However, Cochlear implant revenue continued to experience variability in performance across countries with intermittent COVID-related restrictions reducing operating theatre capacity.

Developed market volumes were ahead of pre-COVID levels despite a modest decline in the half, and its market share position remained “strong”.

Cochlear reported that underlying net profit after tax (NPAT) grew by 26% to $157.5 million.

In terms of the outlook, the company said the underlying net profit guidance range was still $265 million to $285 million, which would represent an increase of between 13% and 22% on FY21. That guidance now includes cloud computing expenses and anticipates continuing COVID-19 impacts for the rest of the financial year.

The second-half trading was tracking in line with the first half. Elective surgery restrictions are hampering some activity. Operating theatre capacity is also being affected by hospital staffing shortages. It’s expecting a lower rate of growth for Cochlear implants for the financial year than originally forecast.

However, despite the ongoing disruption to surgeries caused by COVID, Cochlear continues “to be confident of the resilience” of its business over the longer term.

Long-term opportunity

The Cochlear share price could be influenced by the company’s ability to capture the market opportunity ahead.

The World Health Organisation estimates there are more than 60 million people worldwide who have severe or higher hearing loss. Cochlear says there is a significant, unmet, and addressable clinical need for implantable hearing solutions, with less than 5% market penetration.

It benefits from a growing annuity income stream from the servicing of the expanding recipient base.

Cochlear share price snapshot

The Cochlear share price is down 1.68% at $219.56 in early trading today. However, it is up around 5% over the past year and more than 3% this year to date.

It is now trading at similar levels to what it was before the COVID-19 pandemic took hold in March 2020.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns and has recommended Cochlear Ltd. The Motley Fool Australia has recommended Cochlear Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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