Founded in 1945 and based in Switzerland, Alcon AG (ALC) is a global provider of ophthalmic surgery and vision care products; previously a subsidiary of Novartis AG (NVS), Alcon became an independent company in April, 2019, recalls Jasper Hellweg, an analyst with Argus Research.
We have a favorable view of the company’s market position and product pipeline, and note that sales growth has outpaced increases in marketing and selling costs, resulting in higher margins. Additionally, Alcon continues to launch new products, including the Clareon Toris intraocular lense in the U.S.
Outside of its own development efforts, the company has also relied on acquisitions to drive growth. On August 22, Alcon announced an agreement to acquire Aerie Pharmaceuticals, a developer of ophthalmic therapies, for $770 million.
Through the acquisition, the company will add Rocklatan and Rhopressa, two medications for glaucoma and ocular hypertension, to its portfolio, as well as a Phase 3 product candidate for dry eye disease and a pipeline of other clinical and preclinical ophthalmic product candidates.
We believe that ALC shares are attractively valued at current prices near $57, near the low end of their 52-week range of $56-$89. The shares have fallen substantially over the past year, but recently reached a support line near their IPO price and the 38.2% Fibonacci retracement level, as measured between the stock’s all-time high and all-time low.
If the stock is able to hold this level, we look for a gradual rebound in the stock to its 61.8% level, near $70 per share. Meanwhile, a drop below the current line of support could indicate further downside to the next support level near $51.
On the fundamentals, ALC has a short trading history. It is trading at 22-times our 2023 EPS estimate. We expect Alcon to benefit over time from its strong product pipeline and recent acquisitions, as well as from a continued recovery in surgical volumes. Our rating remains "buy" with a revised target price of $70 a share.
