Yesterday's bounce looks like it was a dead cat bounce. Down 6% and still falling this morning.
No shortage of buyers but the sellers are un-relenting. Down ~8% now.
COH traded on a high PE ~18 and the PE compression alone will bring them down to a pretty ugly level. EPS $3.2 @ say 14x = $45. And that hasn't even take into account any loss in earnings...
ETA - found the probable reason. A rival of COH announced the US launch of its new model. Perfectly timed to take advantage of COH's recall.
Yeah but I think they are doing the recall with an instant replacement leaving no room for an alternative to take advantage of the recall.
COH can swing pretty wildly. In isolation the recall is not a big deal.
The real issue is reputation and FDA scrutiny. May not be a huge deal as FDA is reportedly not necessary as COH stepped in prior to them becoming involved.
I should add that I have been buying it.
I wouldn't mind a piece of COH at $45/share. That would put it at the same level as back in the depths of the GFC.
The P/E ratio was extremely high - pushed above 20x earlier this year. The recall signals a likely end to the high growth period of COH, at least for a few years, whilst COH deals with the reputational hit delivered by the recall.
Yeah but I think they are doing the recall with an instant replacement leaving no room for an alternative to take advantage of the recall.
COH can swing pretty wildly. In isolation the recall is not a big deal.
The real issue is reputation and FDA scrutiny. May not be a huge deal as FDA is reportedly not necessary as COH stepped in prior to them becoming involved.
I should add that I have been buying it.
No shortage of buyers but the sellers are un-relenting. Down ~8% now.
COH traded on a high PE ~18 and the PE compression alone will bring them down to a pretty ugly level. EPS $3.2 @ say 14x = $45. And that hasn't even take into account any loss in earnings...
What has that got to do with anything?!
skc said:COH had ~70% market share at the expense of their competitor's recall... now the shoe is on the other foot. Their future market share will really depends on how well / not well their competitor capitalise on this opportunity. Ultimately all players can only grow at the industry growth rate... anyone seen any projection on those?
skc said:Where did you read about instant replacement? I didn't think they have enough of the other model stockpiled for occassions like these...
I think there will be plenty of time to buy later when they announce the actual financial impact of this event. At $40 probably the worst case is priced in... but now I don't see the market as over-reacting yet imo.
okay..... Thought it fairly obvious - just giving some price history.
COH had about 65% market share before its competitor issued a recall. COH has consistently had the most technologically advanced cochlear implant on the market for years. To attribute COH's high market share to mis-steps from its competitors understates the technological edge COH built for itself over many years of research and development.
Saying that all industry players grow at the "industry growth rate" neglects the potential for further technological breakthroughs.
I have never seen a long term bargain where this has not been the case. Unless you are a trader - I reckon the ‘urge’ to jump on a bargain before it disappears carries a significant message to be patient and give yourself time and room to evaluate developments.there will be plenty of time to buy.
I have never seen a long term bargain where this has not been the case. Unless you are a trader - I reckon the ‘urge’ to jump on a bargain before it disappears carries a significant message to be patient and give yourself time and room to evaluate developments.
My point was price history means little as the new news is new!
skc said:Yes COH has good products but at the same time they benefited (albeit unquantifiable) from the competitors perils. It's one of those hypotehticals that we would never know.
skc said:It's just depends on the definition of the industry... and if such projections capture possibilities of future tech breakthrough. Does the COH price premium include an element of "future technological breakthrough"? Dunno...
skc said:While I might sound very negative I am just flushing out my own thoughts and trying to see where a "safe" entry point is for my risk-adverse investment style.
Without further clarifications from management I would not buy until it's say 25% below a pessimistic scenario of $40. But if I did hold I would probably reduce exposure rather than selling out right, and certainly not buy more.
COH is a fantastic Australian success story and I wish them continued success, but my wish isn't enough to influence the potential risks in the situation.
Just broken $55...
Now that COH has issued its own product recall, that point of differentiation has now disappeared and COH will be brought back into the pack. One bright spot is that COH wasn't forced into the recall by the regulators, unlike some of its competitors.
As well as that, in the instance of Sonova's HiRes 90K devices they were actually causing severe pain in patients when they malfunctioned. A very important difference to the COH devices which automatically shut down. Technology fails every now and then, doctors accept that. The real test is how the company manages the recall, not the recall itself.
I heard a few audiologists being interviewed this morning and they didn't consider it something that would turn them off COH products.
I was having a chat with a doctor and she didn't seem to concerned wrt reputational damage either... but most doctors I know knew very little in way of finance and investments let alone stock valuation ...
Fair enough.
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