Is Teva Pharmaceutical a Falling Knife to Catch After Plunging over 30%?

This week turned out to be a nightmare for shareholders of Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA) after the drug maker missed earnings expectations, lowered its guidance and approved a dividend cut, sending shares tumbling nearly 33%. The big question for investors now is should we buy? Or even sell?

Cantor analyst Louise Chen says neither, while reiterating a Hold rating on the stock and lowering his price target to $27 (from $31), which represents a potential upside of 25% from where the stock is currently trading. (To watch Chen’s track record, click here)

Chen wrote, “The decrease in our PT is driven by downwards earnings revisions and multiple contraction. This is appropriate, in our view, given higher than expected generic drug price erosion and deteriorating economic conditions in Venezuela. We like Teva, but we think the company has some meaningful headwinds which need to be addressed before the stock can trade meaningfully higher. 1) Whether Teva will break the company into brand and generics, 2) Whether Teva can continue to pay down its debt, maintain its investment grade rating and meet tighter covenants at the end of the year, and, 3) How the company will grow through generic drug pricing pressure. Furthermore, we don’t think Teva can make decisions that would fundamentally change its strategy until it hires a permanent CEO and the new CEO has had time to assess the business. We would be more positive on Teva shares if generic drug pricing improves and/or the brand drug launches and pipeline advancements exceed expectations.”

Overall, out of the 11 analysts polled in the past 3 months, 9 rate Teva stock a Hold, while 1 rates the stock a Hold and 1 recommends a Sell. With a return potential of 47%, the stock’s consensus target price stands at $31.29.

Valeant Pharmaceuticals Intl Inc: Canaccord Remains Sidelined Ahead of Earnings

Should you buy Valeant Pharmaceuticals Intl Inc (NYSE:VRX) shares ahead of earnings on August 8? Canaccord analyst Neil Maruoka says hold your horses. In a research report issued today, the analyst reiterated a Hold rating on VRX with a price target of $14, which implies a downside of 7% from current levels. (To watch Maruoka’s track record, click here)

Maruoka wrote, “For the quarter, we forecast a top line of $2.20 billion and adjusted EBITDA of $929.0 million; this compares to consensus revenue and adjusted EBITDA estimates of $2.23 billion and $910.7 million, respectively. Based on IMS data, we expect continued stabilization of its core business, with modest growth in core products like Xifaxan offsetting the continued erosion in other areas. Although the launch of Siliq is likely to be slower, we nonetheless believe this drug could evolve into a modest growth driver for the company. Going into the print, we have made only modest adjustments to our revenue and adjusted EBITDA and GAAP EPS forecasts to include the recently announced divestiture of Obagi.”

“Given Valeant’s elevated leverage, lower growth, and higher risk profile, we believe that a discount to the specialty pharma peer group is warranted,” the analyst concluded.

The overwhelmingly majority of analyst say Valeant stock is a “hold.” The average forecast is for the stock to hit $16.85 in the coming months, according to data compiled by TipRanks, a site that tracks and ranks analysts on their predictions.