Rodman & Renshaw analyst Ram Selvaraju weighed in on Valeant Pharmaceuticals Intl Inc (NYSE:VRX) after the drug maker released its second-quarter results and reaffirmed its guidance for 2016. Valeant reported adjusted cash earnings per share (EPS) of $1.40 and revenue of $2.42 billion, compared to Selvaraju’s expectations of EPS of $1.51 and revenue of $2.435B. Though earnings and revenue come across as “a little light” for the analyst, Valeant has reaffirmed its financial guidance for 2016 of a revenue range from $9.9 billion to $10.1 billion and adjusted cash EPS in a range from $6.60 to $7.00.

In light of this, Selvraju reiterates a Buy rating on VRX, but reduces his price target from $90 to $81 per share, which represents a close to 188% upside from where the stock is currently trading.

Selvaraju comments, “In our view, Valeant is taking a measured and rational approach to targeted divestitures of non-core businesses. The divestment of the Synergetics U.S. OEM business, the return of the brodalumab European rights to AstraZeneca (AZN; not rated) and the recentlyannounced return of U.S. rights for Ruconest to Pharming Group N.V.—which brought in $181M in upfront cash and potential future milestones of $329M—constitute logically structured transactions that do not, in our view, impair Valeant’s base business.”

The analyst has every expectation that the firm will continue to pursue these sales targeting non-core products as long as prices remain obtainable and fair. Meanwhile, Selvaraju finds Valeant has also sustained its commitment to resolving debt for hopes to achieve greater financial flexibility. As such, for Selvaraju, there is no real risk in sight of debt default.

As usual, we recommend taking analyst notes with a grain of salt. They are often successful in moving the stock price, but you always need to take things into perspective. According to TipRanks, two-star analyst Ram Selvaraju is ranked #2,838 out of 4,105 analysts. Selvaraju has a 43% success rate and loses 0.1% in his annual returns. However, when recommending VRX, Selvraju earns 9.5% in average profits on the stock.

TipRanks analytics exhibit VRX as a Hold. Based on 17 analysts polled by TipRanks in the last 3 months, 5 analysts rate a Buy on VRX stock, while 9 maintain a Hold, and 3 issue a Sell. The consensus price target stands at $39.96, marking a nearly 42% upside from where the shares last closed.

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