On Tuesday, Bausch & Lomb Corp. (NYSE:BLCO) received an upgrade in its stock rating by Evercore ISI from In Line to Outperform, accompanied by a significant increase in its price target from $19.00 to $25.00. The adjustment reflects the analyst's optimism about the company's potential for a sale. The analyst cites recent reports indicating that TPG & Blackstone (NYSE:BX) may be considering a joint bid to acquire the company's assets.
The anticipated deal for Bausch & Lomb could value the company at up to $25 per share, which would translate to an enterprise value (EV) of approximately $13.1 billion. This valuation implies a multiple of around 15 times the company's earnings before interest, taxes, depreciation, and amortization (EBITDA), or approximately 14 times adjusted EBITDA excluding stock-based compensation (SBC).
Evercore ISI's analysis includes projections for Bausch & Lomb's organic growth at around 7% for the fiscal year 2025. This estimate is based on a 4.5% base growth rate plus an additional 2.5% from contributions by Miebo. Miebo's treatment prescriptions suggest that the company's third-quarter revenue should show an increase from the second quarter's $42 million. The analyst's forecast for Miebo's revenue in FY25 is approximately $250 million, assuming a similar quarter-over-quarter growth trajectory.
In comparison to its peers, Bausch & Lomb's implied takeout multiple, suggested by the $25 equity share price, is considered to be at a discount. The analyst notes that while the sector's peers are trading at higher EBITDA multiples in the high teens on a forward basis, Bausch & Lomb's valuation remains more modest.
The analyst also mentioned that Bausch & Lomb's shares have been range-bound due to an overhang from its parent company. However, they anticipate that there would be no significant obstacles for the equity holders in the event of a potential sale to private equity.
In other recent news, Bausch + Lomb has reported a robust 20% constant currency revenue growth in the second quarter of 2024, leading them to raise their full-year revenue forecast to between $4.7 billion and $4.8 billion. This growth has been attributed to strategic product launches such as the enVista NV intraocular lens and Bausch + Lomb INFUSE contact lenses.
Following these positive results, Stifel has upgraded Bausch & Lomb's price target to $19.00, maintaining a Hold rating on the stock. Meanwhile, Jefferies has continued to support a Buy rating on Bausch & Lomb, recognizing the inherent value in the company.
In addition to these financial updates, the U.S. Food and Drug Administration has approved Bausch + Lomb's enVista Envy intraocular lens. This new product, built on the company's established enVista platform, is designed to optimize vision across various lighting conditions and correct astigmatism with increased precision. The company plans to make the enVista Envy IOL available in the U.S. on a limited basis soon, with a broader release anticipated in 2025.
InvestingPro Insights
Recent InvestingPro data aligns with Evercore ISI's optimistic outlook on Bausch & Lomb Corp. (NYSE:BLCO). The company's market cap stands at $7.35 billion, with a robust revenue of $4.49 billion for the last twelve months as of Q2 2024. Notably, BLCO has demonstrated strong revenue growth of 15.14% over the same period, with quarterly revenue growth reaching 17.49% in Q2 2024.
InvestingPro Tips highlight that BLCO's net income is expected to grow this year, and analysts predict the company will be profitable. This aligns with the positive outlook presented in the article. The stock has also shown significant momentum, with InvestingPro reporting a strong return over the last month and a large price uptick over the last six months. In fact, BLCO is trading near its 52-week high, with the current price at 96.22% of its 52-week high.
These insights support the potential for a sale at a premium, as discussed in the article. However, investors should note that BLCO operates with a significant debt burden and is trading at a high EBIT valuation multiple, factors that could influence negotiations in a potential acquisition.
For a more comprehensive analysis, InvestingPro offers 11 additional tips for BLCO, providing investors with a deeper understanding of the company's financial health and market position.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.