An Ear To The Ground

By Ben Macnevin | More Articles by Ben Macnevin

Cochlear’s (ASX: COH) strong focus on innovation has resulted in 440,000 people wearing its products. Management is now considering how to leverage this large and enduring customer base while attracting new ones.

One path we think is possible for Cochlear is a subscription model, similar to Apple’s iPhone Upgrade program.

A Cochlear Implant sends sound as a signal to the brain, and sophisticated technology is required for the vast array of sounds that people with full hearing take for granted. In much the same way that Apple users demand faster processing and better features, so too do Cochlear users demand upgrades that process higher quality sound in wider environments.

Users may start paying a subscription to receive incremental benefits on a more regular basis, rather than paying a lump sum every few years for a substantial upgrade. For Cochlear, a steady subscription stream from lifelong users is highly appealing as it provides more stable revenues and brings forward capital to reinvest in the business.

At Montgomery, we think Cochlear is a high quality company with bright prospects but consider the current share price is too expensive. We remain on the sidelines with an ear to the ground.

Ben MacNevin is an Analyst with Montgomery Investment Management. To invest with Montgomery domestically and globally, find out more.