Buy This Ophthalmology Stock But Sell This One, Says Bernstein Analyst: 'Innovation Is Key'

Innovation and digitalization have been in focus among ophthalmology majors.

The ophthalmology market is attractive, at an estimated $34 billion, with growth rates “in the mid-single digits across products that range from the clinic to the operating room to the pharmacy,” analyst Susannah Ludwig of Bernstein said in a note.

• Initiated coverage of Alcon AG ALC with an Outperform rating and a price target of CHF 82 ($94.03).
• Initiated coverage of Carl Zeiss Meditec AG CZMWY with an Underperform rating and a price target of €76 ($82.31).

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The Ophthalmology Thesis: “With high unmet need and low penetration, innovation is key to success in the market. Innovative products not only drive higher penetration,” Ludwig wrote.

Alcon, the largest player in surgical, outspends the next player by 1.9x in R&D, while Zeiss is much smaller in scale and “spends a mid-teens % of sales on R&D, a level they will likely have to keep up as competition has refocused on innovation and as digital becomes more important,” she added.

“Surgical ophthalmology remains incredibly manual,” the analyst said. “Zeiss leads the digital market today, but we see Alcon as the biggest beneficiary of the industry transition,” she further stated.

ALC, CZMWY Price Action: Shares of Alcon and Carl Zeiss Meditec had declined by 2.34% to CHF 66.82 and by 0.95% to €97.62, respectively, at the time of publication Tuesday.

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