Goldman Sachs initiates ophthalmology coverage: Buy Glaukos, sell Cooper

Goldman Sachs has updated its healthcare coverage, focusing on medical technology and healthcare IT, and highlighting ophthalmology as a substantial market opportunity. The bank initiated Glaukos with a Buy rating and a $103 price target, citing its strategic transformation and pipeline potential. Bausch + Lomb received a Neutral rating with a $16 target, balancing growth prospects against elevated leverage, while Cooper Companies was rated Sell with a $64 target due to expected elongated recovery and downside risk to consensus estimates. Goldman also upgraded Beta Bionics to Buy and downgraded LivaNova and Doximity, favoring companies with strong product cycles, discrete growth drivers, and flexible capital allocation.

Analysis

Goldman Sachs has issued a significant update on its MedTech and healthcare IT coverage, identifying ophthalmology as a more than $60 billion market opportunity. The bank initiated coverage on Glaukos (GKOS) with a Buy rating and a $103 price target, citing its strategic shift towards a hybrid device-and-pharmaceutical model and an R&D pipeline valued at an estimated $10 per share. In contrast, Cooper Companies (COO) received a Sell rating with a $64 target, as Goldman sees downside risk to consensus sales and EPS estimates due to an expected 'elongated' recovery. Bausch + Lomb (BLCO) was rated Neutral with a $16 target, presenting a balanced view where potential growth from new products is offset by an elevated leverage profile and low float. Beyond ophthalmology, the update reflects a clear preference for companies with strong product cycles and discrete growth drivers, evidenced by an upgrade of Beta Bionics (BBNX) to Buy and downgrades of LivaNova (LIVN) to Neutral and Doximity (DOCS) to Sell.

Key Decisions for Investors

• Consider a pair trade within the ophthalmology sector by taking a long position in Glaukos (GKOS) and a short position in Cooper Companies (COO) to capitalize on Goldman's divergent fundamental outlooks for the two firms.
• For Bausch + Lomb (BLCO), investors should closely monitor execution on new product launches and margin recovery as key catalysts, while remaining cautious of the high leverage noted by analysts.
• Re-evaluate MedTech and healthcare IT holdings to favor companies with distinct product cycles and near-term growth drivers, such as Beta Bionics (BBNX), while potentially reducing exposure to firms with uncertain recovery profiles or facing downgrades, like Doximity (DOCS) and LivaNova (LIVN).