When Bausch Health (TSX:BHC) reported Q2/2020 results, investors ignored the sharp drop in revenue and GAAP EPS loss of 92 cents. At the time, the B+L spin-off sent the stock from ~$19 to over $22. By the end of last week, shares slumped to $18, down 10% on the day after the report.
What happens next to Bausch stock? Holding shares may lead to further paper losses. Investors are impatient with waiting on the spinoff, too.
The B+L spin-off may create value for investors only if the market is willing to assign a similar multiple to that of Alcon shares. The bad news is that BHC debt is still very high. Revenue declines of 22.8% Y/Y to $1.66 billion and adjusted EBITDA of $622 missing consensus estimates just delays the debt re-payment program.
Bausch had too many products that depend on minor surgeries. With hospitals closed and delaying surgical procedures, BHC revenue dropped. Investors only have a few plays to consider. They may continue holding shares, letting it fall to the $15 - $17 range, and then get B+L stock. If BHC product sales rebound on hospital procedures resuming, then BHC stock and B+L stock will rebound.
Selling BHC stock now in reaction to the poor results will limit any downside losses ahead. Investors could wait for the company to post better results, proving that the worst is over.
