Why Institutional Investors Are Selling Bausch + Lomb and What It Means for Long-Term Investors

Institutional selling of Bausch + Lomb (BLCO) has intensified in 2025, reflecting growing skepticism about the company's ability to navigate financial underperformance, sector-specific risks, and strategic uncertainties. For long-term investors, this exodus raises critical questions: Is the sell-off a rational response to deteriorating fundamentals, or does it present an opportunity to capitalize on a fundamentally stable business undervalued by market volatility?

The Drivers of Institutional Skepticism

Bausch + Lomb's financial struggles have been a primary catalyst for institutional exits. The company reported a net loss of $28 million in Q3 2025, a stark reversal from a $4 million profit in the same period in 2024, driven by rising income tax provisions. Similarly, Q2 2025 saw a net loss of $62 million, down from $151 million in 2024, but still indicative of persistent instability. Over the past five years, net losses have accelerated at a 53.3% annual rate, with no meaningful improvement in profit margins. These trends have prompted institutions like Lombard Odier Asset Management (USA) Corp to cut their stake in Bausch Health Companies by 3.3 million shares, reducing position value by $22.5 million.

Sector-specific risks further amplify concerns. Bausch + Lomb operates in a healthcare landscape marked by corporate restructuring delays, foreign exchange headwinds, and competitive pricing pressures. The company's spin-off timeline remains uncertain, creating hesitation among investors who view long-term strategic clarity as critical for growth. Currency fluctuations alone are projected to cost $17 million in a recent quarter, with further risks looming if global economic conditions deteriorate. Meanwhile, the ophthalmology market's competitive intensity threatens margins, as rivals undercut pricing for non-essential products.

Valuation Gaps and Strategic Uncertainty

Despite these challenges, Bausch + Lomb's valuation suggests a disconnect between current market sentiment and its long-term potential. The stock trades at a price-to-sales ratio of 1.2x, significantly below the industry average of 3.5x. A discounted cash flow (DCF) model implies an even steeper undervaluation, estimating a fair value of $36.37-more than double the current price of $16.97. Analysts, however, remain cautious, with a consensus "Hold" rating and a 12-month price target of $17.00. While upgrades from Citigroup and others hint at optimism, the modest upside reflects lingering doubts about execution risks.

Strategic moves, including potential spin-offs or private equity sales, could reshape the company's trajectory. Bausch Health is reportedly exploring refinancing to facilitate a spin-off of its 88% stake in Bausch + Lomb, which could reduce leverage from 6.1x to 2.9x if proceeds are used to pay down debt. A sale to private equity buyers at a premium valuation might unlock value for shareholders, though execution risks remain unresolved.

Implications for Long-Term Investors

For patient capital, the sell-off may represent a contrarian opportunity. Bausch + Lomb's Q4 2024 results showed resilience, with $1.28 billion in revenue (up 9% year-over-year) and full-year revenue of $4.791 billion (up 16%). The company maintains 2025 guidance of $5.05–$5.15 billion and has outlined a "Vision '27" strategy targeting 5–7% constant currency revenue growth and 23% adjusted EBITDA margins by 2028. Strategic investments in R&D and a pipeline of products with $7 billion in peak sales potential underscore its long-term ambitions.

However, investors must weigh these positives against execution risks. The Surgical segment's success-driven by premium intraocular lenses and devices-may not offset broader challenges in consumer-facing divisions. Global economic uncertainties, including recessionary pressures, could further dampen demand for non-essential healthcare products.

Conclusion

Institutional selling of Bausch + Lomb reflects a market grappling with financial underperformance, strategic ambiguity, and sector-specific headwinds. While these factors justify short-term caution, the company's undervalued stock, growth-oriented strategy, and potential for debt reduction through spin-offs or sales suggest a compelling case for long-term investors. For those willing to navigate volatility, Bausch + Lomb's challenges may be more transient than terminal-offering a chance to capitalize on a fundamentally stable business poised for transformation.