BofA rates Bausch&Lomb ‘underperform’ with lower buyout chances

Investing.com -- Bank of America has reinstated coverage of Bausch + Lomb Corp (NYSE:BLCO) with an "underperform" rating and a price target of $18, amid reduced prospects of a private equity buyout.

The rating of the stock follows a report that Blackstone (NYSE:BX) pulled out of a consortium considering a takeover of the eye care company. Bausch&Lomb’s shares, which had risen 33% since mid-September on buyout speculation, fell 12% after the news.

“A takeout is not imminent and we would expect it to rekindle investor concerns on the timing/likelihood of the spin. BLCO’s fundamentals have been solid over the last several quarters but we think the stock will be a relative underperformer without more clarity on the spin,” analyst wrote.

The uncertainty around a potential spin-off from its parent company, Bausch Health, remains a significant overhang. The parent company still owns 88% of Bausch&Lomb and has provided limited details on separation plans since the company’s IPO in May 2022.

BofA noted that while Bausch&Lomb has shown solid growth in sales and margins, investor focus is likely to remain on the spin-off’s timing and feasibility. Without clarity on separation, the stock is expected to underperform relative to the market.