Cooper Companies: A Contrarian Opportunity Amid Sector Headwinds?

Cooper Companies (COO) has faced a stark divergence between its fundamentals and stock performance in 2025. Despite strong Q2 earnings and robust growth drivers, the shares have underperformed peers like Alcon (ALC) and Align Technology (ALGN) by wide margins. This mismatch presents a compelling contrarian opportunity for investors, as near-term catalysts and a discounted valuation align with a potential rebound. Let's dissect the technicals, earnings dynamics, and sector comparisons to parse the risks and rewards.

Technical Indicators: A Deep Dip, But Are Bulls Lining Up?

COO's shares have plummeted 25.7% year-to-date (YTD)—far outpacing the S&P 500's 0.1% rise and its medical device peers. Alcon (ALC) has gained 3.64%, while Align Technology (ALGN) dipped just 10.45%, highlighting COO's outsized underperformance. The stock now trades at $68.76, nearly 37.9% below its 52-week high of $112.38, and remains below both its 50-day and 200-day moving averages.

Yet, the pullback has created a potential buying opportunity. Analysts note that COO's forward P/E of 16x trades at a discount to its medical device peers' 16.43x average. This valuation gap suggests the market has yet to price in the company's long-term growth catalysts.

Earnings Disappointment: The Catalyst That Backfired

Q2 results were a mixed bag for investors. Revenue rose 6.3% YoY to $1 billion, while EPS jumped 14% to $0.96, both exceeding estimates. The MySight myopia management segment surged 35%, and CooperSurgical's PARAGARD IUD sales climbed 18%, underscoring strong execution.

But shares fell 14.6% post-earnings after COO lowered its full-year growth guidance to 5-6%, down from 6-8%, citing inventory corrections and Asia Pacific fertility market softness. Distributor destocking in contact lenses and tariff headwinds (up to 3% EPS drag by . 2026) further spooked investors.

This guidance cut has left the stock in a technical bind, but it's critical to separate short-term noise from long-term value. The lowered outlook reflects cyclical issues—such as clinic deferrals and global destocking—that could reverse as inventory normalizes.

Historically, this reaction has been consistent. A backtest of buying on earnings announcement days and holding for 20 days from 2020 to 2025 showed an average return of -11.57% CAGR, with a maximum drawdown of 28%, underscoring the risks of short-term timing around these events. These results align with the recent post-earnings drop, reinforcing the need to focus on long-term fundamentals rather than earnings-day volatility.

Sector Comparisons: Why COO's Underperformance Is Misplaced

While COO's stock lags, its fundamentals are stronger than peers in key areas:
- Growth drivers: MySight's 35% expansion targets a $500M global market, and MyDay toric/multifocal lenses are scaling in Canada and Japan.
- Margin resilience: CooperSurgical's 13% revenue growth (10% organic) contrasts with Align's fading orthodontic demand and Alcon's inventory pressures.
- Valuation: ALGN trades at 26x forward P/E, nearly double COO's discount, despite weaker earnings momentum.

Analysts at William Blair and Citi have reaffirmed “Buy” ratings, citing COO's innovation pipeline and underappreciated Surgical division. Meanwhile, JPMorgan's lowered price target to $76 reflects sector-wide caution, but the average 12-month target of $95.64 (from 13 analysts) implies a 39% upside from current levels.

Near-Term Catalysts: When Could the Tide Turn?

Three factors could drive a rebound:
1. Inventory normalization: Distributors are likely to complete destocking by mid-2026, easing pressure on margins and revenue.
2. MySight global expansion: The FDA's pending nod for MyDay toric lenses (expected Q4 2025) could boost adoption in the U.S., a key growth market.
3. Fertility recovery: Asia Pacific clinics may resume elective procedures as macroeconomic fears ease, lifting CooperSurgical's results.

Risks and the Contrarian Play

The bear case hinges on lingering tariff costs, a prolonged myopia therapy slowdown, or further fertility market weakness. However, these risks are already priced into the stock, with COO trading at a 24% discount to its 5-year average P/E.

Investment Thesis:
- Buy the dip: Accumulate COO on weakness below $70, targeting the $95.64 consensus.
- Hold for the long term: The MySight and Surgical divisions offer durable growth, with a runway to $12 billion in revenue by 2027.

Conclusion

Cooper Companies' stock is a classic case of short-term pain vs. long-term gain. While peers like ALC and ALGN have navigated 2025 with less volatility, COO's discounted valuation and pipeline strength make it a compelling contrarian bet. With a 39% upside to $95.64 and catalysts materializing in late 2025, now may be the time to take a position in this undervalued healthcare innovator.

Stay tuned for Q4 updates on MyDay FDA approval and inventory trends—the next catalysts could be just months away.