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Investing.com -- Barclays has initiated coverage of Carl Zeiss Meditec AG (ETR:AFXG) with an “overweight” rating and a price target of €52, signaling a 26% potential upside from its Sept. 5 closing price of €41.36.
Shares of the medical technology company were up 3.5% at 05:26 ET (09:26 GMT).
The analysts centered their outlook on what they called a “consumable world,” focusing on refractive surgery consumables and intraocular lenses (IOLs) as drivers of growth.
The brokerage pointed to three main reasons for backing the stock. First, Carl Zeiss Meditec has steadily gained ground in Surgical Ophthalmology, picking up 100 basis points of market share between 2019 and 2024.
Barclays expects that trend to continue, forecasting 8% growth for the company’s relevant businesses between 2025 and 2028, compared with 6% for the broader market.
Second, a rebound in China’s refractive consumables market is seen as a key catalyst. After a period of volume decline, Barclays said “earnings likely having troughed and risk/reward skewed to the potential upside.”
The analysts’ base case assumes a 5% volume recovery in fiscal years 2025 and 2026, supported by a mix shift back toward higher-value procedures.
“Our base case assumes 5% volume growth in FY25/26E, in line with KOL commentary, and we see mix benefits … as underappreciated,” the brokerage said.
Barclays estimates this recovery could put its adjusted EBITA projections 3% above consensus, with a Blue Sky scenario implying as much as 14% upside.
Third, Carl Zeiss Meditec’s strong position in premium intraocular lenses stands out. Around 60% of its IOL sales come from premium products, compared with 44% for the overall market.
“Carl Zeiss Meditec is well placed to capitalise on premiumisation trends in cataract surgery,” the analysts said.
With the premium segment expected to grow at a 9% compound annual rate from 2025 to 2028, the company’s IOL business is projected to outpace the market with 7% growth.
At a group level, Barclays forecasts 7% compound annual revenue growth and margin expansion of roughly 400 basis points through fiscal 2027/28.
Analysts stressed the company’s valuation is at a decade low, with the stock trading at about 20 times forward earnings and 10 times EV/EBITDA, well below the fair value multiples Barclays places at 23 times and 13 times.
“Valuation is at 10-year lows, both on an absolute and a relative basis,” the report noted.
Risks remain, particularly if the refractive recovery in China falters or further rounds of volume-based procurement in IOLs cut into margins.
Barclays estimated this could result in a 1% to 2% downgrade to consensus forecasts in 2025/26. Even so, the report highlighted the potential for a much stronger outcome, stating, “Upside case - could we see €75 (+80% potential upside)?”
That scenario assumes a full recovery in refractive volumes, a complete reversal of downtrading, and 7% of procedures performed with SMILE Pro technology.