Why This Analyst Thinks Valeant Pharmaceuticals Intl Inc Is Still Doomed

Analyst David Maris of Wells Fargo weighs in on Valeant Pharmaceuticals Intl Inc (NYSE:VRX) ahead of second-quarter earnings, stating that he doesn’t see any indication that the troubled drug maker will experience a turnaround.

Maris writes that details will be an integral part of Valeant’s earnings with investors looking at “whether the trajectory points to debt covenant violations in 2017 or not.” The analyst also notes that cash generation will be a hot topic surrounding Valeant as it may find itself needing to “refinance bulkier tranches of debt.”

Valeant investors will be looking at new CEO Joe Papa, who was hired this past April, for new plans to help ignite the firm. Maris thinks that the rumored asset sales would be “negative for equity investors, as selling assets will also result in reduced earnings and cash flow.” Nonetheless, the analyst expects to see small asset sales of non-core products that have annual sales of $100-$200 million. Investors will also pay attention to whether or not the Walgreens deal is fixed, something Valeant promised would happen.

Maris reiterated his Underperform rating with a valuation range of $17-$22.

According to TipRanks, the analyst has a yearly average return of 9.2% and a 76% success rate. The analyst has a 25.3% average return when recommending Valeant, and is ranked #417 out of 4,085 analysts.

TipRanks shows that out of the 17 analysts who rated Valeant in the last 3 months, 29% gave a Buy rating, 53% gave a Hold rating and 18% gave a Sell rating. The average 12-month price target for the stock is $42.90, marking a 92.38% upside from current levels.

Read More: Rodman & Renshaw Bullish on Valeant Despite FDA Complete Response Letter Setback»


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