The Cochlear Limited (ASX: COH) share price was amongst the worst performers on the ASX 200 in early trade.
The hearing solutions company's shares fell 2.5% shortly after the open. They have since recovered slightly but are still down around 1% to $176.18 at the time of writing.
Why is the Cochlear share price in the red today?
With no news out of the company, investors appear to have been heading to the exits this morning after the release of a bearish broker note out of Deutsche Bank.
According to the note, the broker has downgraded Cochlear's shares to a sell rating with a $157.00 price target.
This price target implies potential downside of approximately 11% from where its shares are trading at present.
Why is Deutsche bearish on Cochlear?
Deutsche has downgraded Cochlear's shares due to its belief that the company's revenue growth will slow in the second half. This is expected to be caused by Nucleus 7 upgrades moving through the typical product cycle.
In addition to this, the broker has concerns over its patent dispute with the Alfred E. Mann Foundation for Scientific Research.
Late last year a federal judge in California ordered Cochlear to pay more than US$268 million for enhanced damages due to a finding of wilful infringement.
Whilst Cochlear is appealing the judgement, the broker appears concerned that the ruling may not be favourable and could lead to a large damages payment.
What now?
Whilst I think that Deutsche Bank makes some fair points, I wouldn't be a seller of its shares.
In fact, I would still be a buyer if you're happy to hold onto them for the long term. This is because I feel Cochlear is well-positioned to benefit from the ageing populations tailwinds over the next couple of decades.
Furthermore, I suspect the market has already accepted that this patent dispute could go against the company and is a key reason why its share price has pulled back significantly from its 52 week high of $221.44.
But if you're not convinced, then fellow healthcare stars CSL Limited (ASX: CSL) and ResMed Inc. (ASX: CSL) could be quality alternatives.
