Teva Pharmaceutical Industries Ltd (ADR) (TEVA) Charms a New Bull Who Says the Stock Is “Less Risky” After Cost-Cutting

Mizuho's Irina Rivkind Koffler is leaving the sidelines on Teba and boosting her price target, now angling for 19% upside.


Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA) new Danish CEO Kare Schultz is ready to make the tough calls to save the embattled Israeli pharma giant, and that includes slashing costs to the tune of $3 billion by the close of next year. If that comes at the cost of a worldwide work force chopped by 14,000 jobs, so be it, as Schultz is down to the nitty-gritty here, intending to shut down “around half” of Teva’s 80 facilities in this time. “Where it doesn’t affect revenue generation,” Schultz says, it is a cost he is intending to cut; all to steer this sinking ship that has been drowned in massive debt back to its former glory.

Mizuho’s analyst Irina Rivkind Koffler likes what she sees with this “restructuring initiative” between “heavier cost cutting, 2017 asset divestitures, and slower generic deterioration.”

In reaction, the analyst is getting confident, upgrading from a Neutral to a Buy rating on Teva stock while hiking the price target from $16 to $23, which implies a nearly 19% upside from current levels. (To watch Koffler’s track record, click here)

Ultimately, “We believe cuts are likely conservative and achievable. However, in anticipation of a major clean-up of the generics business and what we think will be conservative 2018 guidance, we lowered our 2018 revenue estimates and model below the Street (we model revs of $18.8B and adj. EBITDA of $5.3B, vs. FactSet consensus of $19.6B and $5.4B). We view TEVA as less risky following the cost-cutting announcement, and recent investor presentation from Momenta (which suggests that a less competitive Copaxone market is likely in 2018), with a lower long-term generic decline after the initial restructuring, and now model WACC of 8% and terminal growth decline of -2% (in line with our view of Valeant), vs. 9% and -3% previously. We would note these estimates are still more conservative than our assumptions for Mylan,” Koffler asserts.

TipRanks shows analysts that are opting to play it safe when it comes to betting on this Israeli biotech player’s comeback. Out of 22 analysts polled in the last 3 months, 6 are bullish on Teva stock, 12 remain sidelined, while 4 are bearish on the stock. With a loss potential of nearly 3%, the stock’s consensus target price stands at $18.82.