Morgans just tipped hearing tech play Audeara to nearly triple from its current price
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Leading stockbroker and wealth manager Morgans has tipped Audeara (ASX:ADA) to take off from its current price of 11.5 cents towards 33 cents.
Audeara produces headphones designed to help people who need hearing aids with entertainment experiences as well as a mobile app which is integrated with the headphones and can perform individualised hearing tests.
Specifically Audeara’s technology rebalances audio output to suit different hearing profiles and it can do this anywhere through a dedicated app.
Audeara’s first product is currently stocked in 712 audiology clinics and it recently signed a distribution agreement with Westone enabling access to another 12,000 clinics globally.
While shares have declined since the company’s debut, Morgans believes the current share price represents “a clear buying opportunity”.
Morgans favours Audeara because of the substantial opportunity the company has potential to capitalise on.
Audeara’s market opportunity was US$2.4 billion in 2018 and is forecast to reach US$5.7 billion by 2025.
Morgans believes Audeara could gain from increasing consumption of audio content and underlying technologies, particularly smartphones and subscription services for audio content as well as technological improvements to wireless technology.
“We view AUA is well positioned to capitalise on this market opportunity especially as consumer awareness of the issue increases,” the report, authored by analysts Iain Wilkie and Scott Power, said.
Morgans predicted if Audeara could increase its presence from 712 Australian-based audiology clinics to 1200 and sell 7.7 units per year, it could make $2.3 million in revenue.
Other factors mentioned by Morgans as favourable to the company included government reimbursements, its existing retail partnership and further development options.
Audeara has preserved $850,000 over the next two years to further develop current products as well as future products which could be complementary.
Morgans also said a corporate transaction (a deal such as a merger, acquisition or even a licensing agreement) was not unforeseeable if the company continued on the right path.
It alluded to last month’s US$240 million acquisition of Sennheiser’s consumer business by global hearing aids giant Sonova as one such example of a transaction in the sector.
“We view further vertical integration within the hearing health market as likely in the coming years as the large industry players continue to look for market share and products which may help engage and retain patients at an earlier stage of condition progression,” it said.
“AUA appears well-placed in this regard if it can demonstrate international market adoption in the medium to long term.”