Alcon Top Pick for 2025 at Needham, added to Conviction List

Investing.com -- Needham&Company marked Alcon (NYSE:ALC) as its top pick for 2025, adding the medtech stock to its Conviction List while raising the price target to $108 from $103.

The company's US-listed shares rose more than 1% Tuesday.

The moves reflect a positive outlook on Alcon's upcoming product launches, which are anticipated to accelerate revenue growth and strengthen margins and earnings by 2026.

Alcon's product launch lineup, considered one of the best since its spin-off from Novartis (LON:0QLR) (SIX:NOVN), is expected to significantly contribute to its performance.

The company has disclosed eight new products set to launch in 2025, with PanOptix Pro, slated for release in the first half of the year, likely to be the most impactful. Needham believes this product alone can increase revenue growth by 30 basis points, improve operating margin by 20 basis points, and add $0.04 to earnings per share.

The first full product launch of the year, Precision 7 in January, is projected to boost 2025 revenue growth by 90 basis points and contribute $0.03 to earnings per share.

Despite low expectations for the US launch of Unity VCS, survey data suggests solid demand, which could lead to a 150 basis point increase in revenue growth and an additional $0.03 to earnings per share.

“Importantly, the Unity platform launch will drive margin accretive consumables which could partially, or fully, offset the equipment's margin pressure,” Needham analysts led by David Saxon said in a note.

The firm’s analysis indicates that Alcon's end markets, particularly in cataracts and contact lenses, should perform robustly in 2025.

The survey of US doctors suggests strong intraocular lens (IOL) volumes, and Alcon's PanOptix Pro launch is expected to help the company recapture market share lost to competitors like Johnson&Johnson (NYSE:JNJ)'s Odyssey.

In contact lenses, Needham analysts expect wearer volumes and trade-ups to both remain robust.

In terms of valuation, Needham sees it as attractive, with the stock trading at a next-12 month price-to-earnings (P/E) ratio of 25.7x, marking a 14% discount to its five-year historical average of 30.0x.

“We expect product launches to result in revenue growth accelerating throughout 2025 which should drive multiple expansion as ALC's 2026 margin and earnings outlook strengthens,” analysts said.