On Wednesday, Citi downgraded shares of Bausch & Lomb Corporation (NYSE:BLCO) from Buy to Neutral and adjusted the price target to $22 from $24. The downgrade follows an evaluation of the company's performance since its spin-out from parent company Bausch Health in 2022.
Bausch & Lomb, which remains 88% owned by Bausch Health, has seen its stock underperform for most of the year, with a notable ~19% year-to-date increase primarily driven by speculation of a potential sale reported in September.
The company has been leveraging new products, particularly in the Vision Care sector, where its daily SiHy lenses have gained market share. Bausch & Lomb is also expected to continue its growth momentum with the launch of premium intraocular lenses (IOLs) into 2025, which should bolster its Surgical segment.
Additionally, the company's products in the dry eye category, Miebo and Xiidra, are anticipated to contribute to growth in the coming year, although there are concerns regarding the impact of the Inflation Reduction Act and Medicare rebates on Xiidra.
Despite the solid fundamental position of the company and reasonable revenue growth expectations for FY25, Citi notes that the ongoing majority ownership by Bausch Health has been a persistent overhang since the initial public offering. Furthermore, while the potential for a company take-out could offer upside to the stock, there is no certainty that such an event will occur.
The revised price target of $22 is based on a 12-13x multiple of the estimated 2025 EBITDA, reflecting the balance of potential growth drivers against the risks and uncertainties faced by the company.
In other recent news, Bausch & Lomb has been the center of attention due to its impressive financial performance. The company reported a significant 19% year-over-year increase in third quarter revenues for 2024, reaching $1.196 billion. This robust growth was largely driven by the successful launch of products such as Miebo and Xiidra, and the contact lens segment, particularly SiHy Dailies, which saw a 79% year-over-year increase.
In response to these strong results, Bausch & Lomb raised its full-year revenue guidance for 2024. The company also secured $400 million in new term loans, according to a recent SEC filing, providing it with additional financial flexibility. Despite the company's strong performance, Morgan Stanley (NYSE:MS) downgraded the stock from Overweight to Equalweight, citing the stock's significant appreciation over the past year.
Analysts from H.C. Wainwright and Stifel have also weighed in on Bausch & Lomb's recent developments. H.C. Wainwright upgraded the stock price target to $23.00 from the previous target of $22.00, while Stifel maintained a Hold rating with a consistent price target of $19.00. These recent developments highlight Bausch & Lomb's strategic focus on high-margin products and operational efficiency, which have contributed to its growth and financial leverage.
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