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UBS raised its rating on Cochlear Ltd. (ASX:COH) from Neutral to Buy on Wednesday, while increasing its price target to AUD325.00 from AUD285.00. The upgrade reflects expectations for stronger medium-term earnings growth driven by the company’s upcoming product releases. According to InvestingPro data, Cochlear currently trades at a P/E ratio of 50.4x, reflecting the market’s high growth expectations for this low-volatility stock with a beta of 0.4.
The investment firm projects Cochlear’s next-generation cochlear implant portfolio will boost its global market share and lift its three-year cochlear implant revenue compound annual growth rate to 10%. This product-driven growth forms a key part of UBS’s more optimistic outlook for the hearing implant manufacturer. The company’s strong financial foundation supports these growth initiatives, with InvestingPro analysis showing an impressive 75.15% gross profit margin and a "GREAT" overall financial health score.
UBS also anticipates Cochlear’s Services revenue will increase by 40% over the next three years. This growth will be supported by a 26% expansion in the company’s cochlear implant installed base units and a recovery in sound processor replacement rates.
The firm specifically noted that upgrades to Cochlear’s new Kanso 3 off-the-ear sound processor will help drive the service revenue growth. These product innovations represent significant advancements in the company’s hearing technology offerings.
The revised growth projections led UBS to increase its price target to AUD325.00 per share, suggesting Cochlear can support a price-to-earnings ratio in the low 40x range on a one-year forward basis. Cochlear also trades in the U.S. as an over-the-counter stock (OTC:CHEOY). The company has maintained dividend payments for 30 consecutive years, with a current dividend yield of 1.02%. Subscribers to InvestingPro can access 13 additional investment tips and comprehensive financial metrics for deeper analysis.
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