Is the Cochlear share price in the buy zone now that it’s down 23%?

The Cochlear Limited (ASX: COH) share price has undergone a significant market correction since late February.

The medical device company’s share price fell from $251.55 on 19 February to $159.41 in late March. Since then it has regained some of its losses and is now trading at $194.55. However, its share price recovery over the past few months has been weak compared to other companies listed on the S&P/ASX 200 Index (ASX: XJO).

Cochlear has been significantly impacted by the coronavirus pandemic. This was caused by the sharp reduction in elective surgeries, but the situation is now improving in some markets.

With its share price down by 23% since the COVID-19 pandemic began, is the Cochlear share price now in the buy zone?

Cochlear hit hard in the first wave of the pandemic

Cochlear has witnessed a significant disruption to its business due to the coronavirus crisis. Elective surgeries, including those used for Cochlear implants, have been deferred across a number of its operating countries.

In response, Cochlear successfully raised $880 million from an institutional placement in late March. This has significantly strengthened its balance sheet and places it well to weather any COVID-19 headwinds.

In a May market update, Cochlear revealed that the company had suffered a significant decline in Cochlear implant surgeries in the US and Western Europe. Sales across its business divisions in April fell by around 60% on the prior corresponding period. As most elective surgeries had been postponed, Cochlear implant unit sales declined by 80% across developed markets.

Signs of improving market conditions

On a more positive note, implant surgeries are restarting in some major developed markets including the US, Germany and Australia.

Elective surgeries have continued in South Korea and Japan, despite a slowdown in Japan in late April. The Chinese market is also bouncing back. 

So, is the Cochlear share price a buy right now?

With Cochlear’s share price still well below it’s February price pre-COVID-19, I think the market currently offers investors a reasonably good buy. However, there could be further market volatility. So I would only advise purchasing shares with a long-term investment lense.

As the proportion of the global population over 65 continues to grow, the demand for quality hearing products and solutions will grow over the coming decades. Cochlear has an entrenched market position due to its strong brand and market-leading position. It also operates in an industry with high barriers to entry.

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Phil Harpur owns shares of Cochlear Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Cochlear Ltd. The Motley Fool Australia has recommended Cochlear Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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