The Sonic Healthcare Limited (ASX: SHL) share price was out of form on Tuesday.
The healthcare company's shares were caught up in the selloff and sank 4% to $39.46.
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Is the Sonic share price weakness a buying opportunity?
One leading broker that is likely to see the weakness in the Sonic share price as a buying opportunity is Morgans.
According to a recent note, the broker has an add rating and $45.98 price target on its shares.
Based on the current Sonic share price, this implies potential upside of 16.5% over the next 12 months before dividends.
In addition, Morgans is forecasting a 95 cents per share dividend in FY 2022. If you include this, the total potential return stretches to 19%.
What did the broker say?
Morgans likes Sonic for a number of reasons. One of those is its belief that the company will continue to benefit from COVID testing. While it acknowledges that peak testing may be behind us, it feels the outlook for testing remains strong.
Another reason the broker is bullish on the Sonic share price is its balance sheet. It believes the company has $1.5 billion of balance sheet capacity to use on acquisitions to support its growth.
Morgans commented: "We see COVID-19 testing continuing into the foreseeable future, with growth potential in COVID serology testing. SHL's global base business is increasingly resilient, benefitting from geographical diversity. Strong B/S (gearing 21.6x; A$1.3bn headroom) opening the door to acquisitions, contracts and JVs."
So, although the Sonic share price is smashing the market in 2021 with a 20% gain, Morgans doesn't believe it is too late for investors to get on board. This could make it worth considering, especially after market volatility this week dragged its shares lower.
