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Please clarify your thoughts on Sonic Healthcare (SHL)

Our Q&As are emailed in our Saturday Morning Report, find the answer to this question below.

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Please clarify your thoughts on Sonic Healthcare (SHL)

Thanks for continuing good work and for keeping the jargon to a minimum. On Saturday QandA (13 Apr 2024) you referred to a recent MM report on SHL dated 8 Mar 2024 where you had said it was "too early to be positive", and you then repeated that assessment on 15 Apr. However you did not refer at all to the later MM 28 Mar 2024 SHL report where you said SHL was now a "recovery play" and that you were targeting SHL to go to $35.00. Is this $35.00 Price Target still your assessment, or have you now decided on a reduced Price Target? If so, what is it? MM reports on stocks are fairly difficult to deal with without clear Buy Price Areas and clear Price Target Areas (at least for me)!

Answer

Hi Gil,

We pride ourselves at MM on being clear and transparent with our “opinions & Actions” but we must be a touch flexible with “Buy Price Areas and clear Price Target Areas” due to ongoing news flow and market dynamics, not to mention a couple of obvious influences which impact our day to day thinking around a certain stock, e.g. when we are buying sometimes we scale in slowly whereas at other times we pay up. We view our entire portfolio as one large jigsaw with each position the equivalent to a piece, which in itself may determine our entry/exit approach on certain stocks.

Moving back to diagnostics business SHL which we were indeed cautiously bullish towards in March around $29. Fortunately we stuck with ResMed (RMD) and Ramsay Healthcare (RHC) for our healthcare exposure with SHL subsequently dropping towards $26, making fresh 3-year lows in the process.

While we still believe SHL are potentially in the early stages of a recovery helped by improving revenue in the US we need a catalyst to catch this falling knife, i.e. we are now neutral & watching at this stage.

 

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Sonic Healthcare Ltd (SHL)
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