By Jason Fittler
Back on the 16 of September 2011 I wrote about Cochlear having to recall its main product the Nucleus CI500 implant, which had a malfunction.
Overall only 1.9% of the implants worldwide failed. The problem was between February 2010 and September 2011 the failure rate was 42% with 60% of these incurring in the last 6 months before the recall. This news pushed the share price down 30% to around the $50 mark, which is where we brought.
This week the company announced that they have resolved the problem with the implant. This now allows them to start planning the return of the product to market.
What we need to keep in mind is that they have not fixed the problem. They are now working on how to get the product fixed and back on the market.
On the back of this news the share price jump back to $64, although still below the previous high of $73 I am taking the opportunity to lock in profits on the shares purchased in September. It is an average gain of 28% in 3 months.
Over time I like this stock but they still have to fix the problem and get the product back on the market.
I also expect to see this recall reduce the bottom line profits. The stock has fallen back to around $62 in the past couple of days.
I expect you will have the opportunity to buy this stock cheaper in the coming year as such I am taking profits on this trade.
For more information on Cochlear Limited (COH) please contact us on 07 4771 4577.