Alcon: Eyeing A Growth Story That Could Profit From A Weaker Dollar (NYSE:ALC)



Did the U.S. dollar peak? That may be a major query as we head into yr end. If the greenback indeed turns south in 2023, that could possibly be a serious tailwind for foreign stocks. Consider that even in 2022 with an awfully strong dollar, ex-U.S. equities are literally fractionally beating the broad domestic stock market. That tells me there could possibly be more relative strength brewing. Finding decent growth names overseas could possibly be the play on your portfolio.

Foreign stocks at the moment are beating U.S. stocks YTD. And this with the USD +12.5% in 2022.

Foreign stocks are now beating U.S. stocks YTD. And this with the USD +12.5% in 2022.

In keeping with Bank of America Global Research, Alcon (NYSE:ALC) is a medical device manufacturing company that develops and manufactures revolutionary medicines and devices to serve the complete life cycle of eye care needs. It focuses on the fields of ophthalmology pharmaceuticals and medical devices, eye care, and eye health.

The corporate was founded in 1945 and is headquartered in Geneva, Switzerland. It’s a $33.4 billion market cap Health Care Equipment & Supplies industry company throughout the Health Care sector and includes a high 56.1 trailing 12-month GAAP price-to-earnings ratio. Paying only a 0.3% dividend yield, the corporate reported better-than-expected bottom-line numbers on November 15 but missed on revenues.

Alcon features strong earnings margins through its devices and international sales. It’s a key metric to look at in quarterly earnings numbers. What’s also essential is Alcon’s ability to grow organic sales while leveraging strong assets on its balance sheet. It did, though, announce its plans to accumulate Aerie Pharmaceuticals back in August on a bet on glaucoma treatment demand. Recently, nonetheless, Societe Generale downgraded the stock on weaker margin guidance in its Q3 report.

Upside potential for ALC comes via faster adoption of its premium services in addition to demand for its reusable contact lenses. Downside risks stem from weaker reimbursement policies which could cap market penetration efforts. There’s also intense competition all over the world within the contact lens market.

On valuation, analysts at BofA consider a high earnings multiple is warranted on ALC given its high growth. Per-share profits are seen as growing modestly this yr, but then accelerating in 2023 and 2024. Dividends should grow about commensurate with earnings, however the yield should remain small. While trading at a P/E north of 30, that would retreat should earnings confirm strongly. Furthermore, the corporate is free money flow positive. Overall, a forward PEG ratio of two.0 shouldn’t be overly expensive in my eyes.

Alcon: Earnings, Valuation, Free Money Flow Forecasts

Alcon: Earnings, Valuation, Free Cash Flow Forecasts

BofA Global Research

Looking ahead, corporate event data provided by Wall Street Horizon show an unconfirmed Q3 2022 earnings date of Tuesday, February 14. Before that, though, Alcon’s management team is anticipated to talk on the Berenberg European Conference 2022 from December 5 through 8. Often at these events, particularly for pharma corporations, share prices can move when industry or company-specific news breaks.

Corporate Event Calendar

ALC: Shares Above Support, Watching the 200dma

Wall Street Horizon

The Technical Take

ALC has been stuck in a downtrend for nearly one yr. After peaking in December 2021, shares eventually dipped to a 38% drawdown, however the stock rebounded greater than 20% to its November high. Post earnings, the stock has pulled back though. I see support within the $62 to $64 range – right below the present price. There could possibly be solid resistance on the falling 200-day moving average. That line was support on just a few tests in 2021 before becoming a degree of selling this past summer.

I believe the stock is a good risk/reward for the time being, nevertheless it would look higher on a longer-term basis on a climb above about $71. Also be aware of improving RSI, which further supports the bullish case.

ALC: Shares Above Support, Watching the 200dma

ALC: Shares Above Support, Watching the 200dma

The Bottom Line

After a steep drawdown and with still-robust earnings growth on the horizon, I believe Alcon is a buy here. Short-term traders may also play it using the value levels I outlined.

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