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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The S&P/ASX 200 Index (Index:^AXJO) snapped a two-day winning streak which wasn’t helped by broker downgrades of a number of popular ASX stocks.

The top 200 benchmark fell 0.9% on Thursday as it tried and failed to reclaim the psychologically important 6,000 level.

Experts remain divided on whether the fundamentals justify the big market bounce from its bear market low 13 weeks ago.

But there’s little doubt that some outperforming ASX shares are overbought, according to these leading brokers.

Downshifting to neutral

One runaway that got downgraded today by Macquarie Group Ltd (ASX: MQG) is the Carsales.Com Ltd (ASX: CAR) share price.

Shares in the online auto classifieds group surged by nearly 70% since the market bottomed and its latest upbeat trading update is adding fuel to the red-hot fire.

Management reported a sharp uptick in lead volumes as demand for personal transport jumped in this COVID-19 era.

But the analysts at Macquarie think these tailwinds are one-off in nature and cannot be sustained.

“We see the good news in the update as a boost to near-term earnings, although longer-term earnings implications are more modest,” said the broker.

Macquarie cut its recommendation on the stock to “neutral” from “overweight” with a price target of $18 a share.

Good stock at wrong price

Another outperformer that got downgraded following its latest trading update is Ansell Limited (ASX: ANN).

Citigroup lowered its recommendation on the stock to “neutral” from “buy” despite the good demand outlook for the company’s gloves and protective equipment.

Management reiterated its FY20 guidance and said its chief executive Magnus Nicolin will delay his retirement by six months to steer the company through to the other side of the COVID-19 crisis.

The broker also praised Ansell for not engaging in price gouging, like its rivals, as such a move is only good in the short-term but harmful in the longer run.

Nonetheless, the 65% surge in the Ansell share price from the market bottom (which takes it to near record highs), prompted Citi to downgrade the stock.

The broker’s price target on Ansell is $35 a share.

Mega surge prompts downgrade

Meanwhile, the Megaport Ltd (ASX: MP1) share price is also trading above its pre-coronavirus high. This prompted Morgans to downgrade its call on the stock to “hold” from “add”.

The stock outperformed as demand for its services jumped with more people working from home and needing connection to the cloud.

“MP1’s share price has rallied ~122% in the last twelve months and performed strongly after dropping significantly in the March market selloff,” said Morgans.

“We continue to rate the business and outlook positively. However, the MP1 share price now sits within 10% of our revised price target.”

The broker’s 12-month price target on the stock is $14.14 a share.

More reading

• ASX 200 falls 0.9%, Afterpay share price hits new record
• Is the Cochlear share price in the buy zone now that it’s down 23%?
• Reserve Bank of Australia almost halted property sales in April
• Broker’s latest buy ideas of ASX stocks you probably not heard of
• Can these 5 FY20 dogs of ASX 200 bounce back in the new financial year?

Brendon Lau owns shares of Ansell Ltd. and Macquarie Group Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of MEGAPORT FPO. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. The Motley Fool Australia has recommended Ansell Ltd., carsales.com Limited, and MEGAPORT FPO. 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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The Reserve Bank of Australia (RBA) was close to suspending the entire Australian property market in April, according to reporting from the ABC.

The RBA has been putting on a happy face of sorts during the recent economic and financial turmoil. 

But the reporting (obtained under Freedom of Information laws) reveals that behind closed doors, the RBA’s outlook was less optimistic. 

Speaking notes from RBA Assistant Governor, Luci Ellis report her stating:

“Demand for new housing has declined substantially since mid-March and is expected to decrease further [with] sharp falls in sales, enquiries and foot traffic [and] increases in contract cancellation rates… Housing prices are expected to decline by around 7 per cent over the next year. Prices are expected to remain around 10 per cent lower than at the February Statement over the forecast horizon”.

Shockingly, the ABC also reports that the RBA was advised to consider implementing a ‘pause’ to the housing market. This was in order to dampen reports of a ‘housing collapse’ which had the potential to spook nervous investors.

Notes from RBA economist, Nick Garvin reveal that Garvin wrote to the RBA board and recommended the pause. Garvin stated, “I think it’s dangerous for regulators to be reporting on housing prices as though the market is currently functioning.”

The article also reports that this attitude towards housing may have influenced the government’s HomeBuilder program, announced in early June. Under HomeBuilder, new home constructions, as well as renovations, can attract government grants up to $25,000.

What does all this mean for ASX shares?

Although they are not too closely correlated, the housing market and ASX share market walk hand in hand to an extent. The real dangers (in my view) of a housing collapse stem from what’s known as the wealth effect. This refers to the tendency of people to ‘feel poorer’ if the assets they own fall in value. Although many people will be materially unaffected if property value drops, they will be less inclined to spend and more inclined to save or pay off the mortgage.

This is bad news for the Australian economy, and therefore bad news for the ASX-listed companies that dwell within it.

We’ll have to wait and see for the full impacts from the coronavirus pandemic on Australian house prices. But I think early signs say the worse is behind us. The real test will be when government assistance programs like JobKeeper are wound back, come September.

More reading

• ASX 200 falls 0.9%, Afterpay share price hits new record
• Is the Cochlear share price in the buy zone now that it’s down 23%?
• Top brokers have just downgraded Carsales.Com and these outperforming ASX 200 stocks
• Broker’s latest buy ideas of ASX stocks you probably not heard of
• Can these 5 FY20 dogs of ASX 200 bounce back in the new financial year?

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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.

The post Reserve Bank of Australia almost halted property sales in April appeared first on Motley Fool Australia.

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