'Clear leader in a defensive industry': Cochlear (ASX:COH) share price jumps on broker upgrade

Cochlear shares could be in the buy zone

| More on:
a man raises his fists to the air in joyous celebration while learning some exciting good news via his computer screen in an office setting.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • Cochlear smashed expectations with its half year results
  • This went down well with the team at Goldman Sachs
  • Its analysts have upgraded the company's shares and highlighted its huge cash balance

The Cochlear Limited (ASX: COH) share price has been charging higher again on Wednesday.

In morning trade, the hearing solutions company's shares are up 7% to $222.02.

This means the Cochlear share price is now up over 16% in the space of two days.

Why is the Cochlear share price storming higher?

Investors have been bidding the Cochlear share price higher since the release of a stronger than expected half year result.

For the six months ended 31 December, Cochlear delivered a 26% increase in half year underlying net profit to $158 million. This was well ahead of the market consensus estimate and has led to many brokers upgrading their estimates and recommendations.

One of those is the team at Goldman Sachs.

What did Goldman say?

According to a note this morning, the broker has upgraded the company's shares to a buy rating with a $237.00 price target.

It was very pleased with its performance and notes that Cochlear is a "clear leader in a defensive industry with improving fundamentals."

Goldman commented: "There is little doubt around the long-term, defensive nature of the cochlear implant (CI) market, or COH's competitive position within it. Rather, the largest recent debates have revolved around the extent to which surgery restrictions, staffing limitations and changes to patient/physician behaviour will preclude a strong volume profile from returning."

"Whilst volatility clearly remains, on all fronts we are now more comfortable than any time since the start of the pandemic. Even after today's +5% upgrade, we believe guidance appears more realistic/beatable than for several years (COH has shown a mixed track record in this regard for some time). Covid-driven disruption is falling in most key markets, and we see scope for a clear sequential improvement in both earnings and sentiment towards this stock," it added.

Goldman Sachs also highlights the company's huge cash balance of $506 million. It notes that "COH has little need to maintain such a material cash balance and, as conditions continue to improve, we expect management to more strongly prioritise any number of accretive deployment opportunities."

Motley Fool contributor James Mickleboro 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.

More on Share Market News

two men smiling with a laptop in front of them, symbolising a rising share price.
Broker Notes

These ASX 200 shares could rise 25% to 60%

Analysts think these shares are top buys and could rise materially.

Read more »

A man looking at his laptop and thinking.
Share Gainers

Here are the top 10 ASX 200 shares today

Investors finished the trading week on a sour note today.

Read more »

Happy teen friends jumping in front of a wall.
Share Gainers

4 ASX 200 stocks smashing the benchmark this week

Investors are sending these four ASX 200 stocks soaring this week. But why?

Read more »

A happy young couple lie on a wooden deck using a skateboard for a pillow.
Broker Notes

Bell Potter says this growing ASX 200 stock can rise over 40%

Big returns could be on the cards for buyers of this stock.

Read more »

Broker written in white with a man drawing a yellow underline.
Broker Notes

Brokers name 3 ASX shares to buy today

Here's why brokers are feeling bullish about these three shares this week.

Read more »

A couple makes silly chip moustache faces and take a selfie on their phone.
Share Market News

Which delivered superior returns in FY25: CSL, A2 Milk, or Telstra shares?

We review the share price growth and dividend income delivered to investors in FY25.

Read more »

Woman with an amazed expression has her hands and arms out with a laptop in front of her.
Share Gainers

Why IGO, Johns Lyng, Lynas, and Web Travel shares are pushing higher today

These shares are ending the week on a high. But why?

Read more »

Person with thumbs down and a red sad face poster covering the face.
Share Fallers

Why Imricor, Ora Banda, Ventia, and Vulcan shares are dropping today

These shares are ending the week in the red. But why?

Read more »