COH uncharacteristically fell almost 7% on Tuesday after influential UBS downgraded the stock to a sell on competition fears after the stock’s ~50% advance since 2023. Their main discussion reminded us of the Ozempic et al. fears that sent ResMed (RMD) tumbling in August/September of last year; UBS’s main concerns were as follows:
- Moderna appears to have a good chance of getting a vaccine approved, which could treat ~20% of child deafness.
- If we see the mRNA-1547 come onto the market, it would threaten 5-6% of COHs revenue.
- UBS are allocating a 75% chance of launch possibility after interviewing a number of the top specialists in the space.
The main issue for MM is the stock is priced for growth, trading on 51x earnings, but it might be about to experience a tougher few years, and we are in a market which has no hesitation re-rating stocks aggressively in either direction; we cannot get excited around current levels even if there’s only a 50% chance of mRNA-1547 gaining acceptance, i.e. the risk/reward is not exciting. However, this is a quality business that dominates in its space; while we don’t think it stacks up here and now, if it suddenly becomes a lot cheaper, we will not hesitate to consider the stock.
- COH is unlikely to become another ResMed (RMD), but we feel the upside is limited from current levels until we have certainty around mRNA-1547.
MM is neutral COH around $287
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