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On Friday, Bernstein SocGen Group resumed its coverage of Sonova Holding AG (SOON:SW) (OTC: OTC:SONVY), assigning the stock a Market Perform rating and setting a price target of CHF280.00. The research firm’s position reflects a cautious outlook on the company’s long-term market differentiation despite the recent launch of its AI-enhanced Phonak Sphere hearing aid. According to InvestingPro data, Sonova, with its market capitalization of $18.23 billion, currently trades at a relatively high EBITDA multiple of 21.7x, suggesting premium pricing in the market.
Susannah Ludwig of Bernstein SocGen Group noted that Sonova’s valuation at 23.5 times the projected earnings for the fiscal year ending March 2025/26 is higher compared to its peer Demant, which trades at 17.5 times its forecasted 2025 earnings. The valuation suggests that investors are optimistic about Sonova’s innovation prospects following its latest product release. InvestingPro analysis reveals strong fundamentals, with a robust gross profit margin of 72.42% and good overall financial health. However, Ludwig expressed skepticism about the long-term impact of the new product on Sonova’s market position, stating that while the Phonak Sphere is a strong product that has improved speech recognition in noisy environments, it is unlikely to significantly disrupt the historical pattern of limited differentiation among leading hearing aid manufacturers.
Despite these reservations, Bernstein anticipates that Sonova will deliver robust financial results over the next year. The firm’s forecasts include a compound annual growth rate (CAGR) of 6% for top-line revenue from the fiscal year 2024/25 to 2028/29 and a 6.5% CAGR for earnings per share (EPS) over the same period. The analysis also points out that a competing product from Demant, Sonova’s main rival, is not expected to enter the market for another 12 to 18 months, which could maintain the current market perception in the near term.
The Market Perform rating indicates that Bernstein SocGen Group expects Sonova’s stock performance to align with the broader market, without significant outperformance or underperformance in the immediate future. The price target of CHF280.00 represents Bernstein’s assessment of the stock’s fair value based on their analysis.
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