Keep the Faith on Teva Pharmaceutical Industries Ltd (ADR) (TEVA) Despite Short-Term Volatility: Oppenheimer

Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA) shares are falling nearly 7% following CEO Erez Vigodman’s exit, leaving current chairman Dr. Yitzhak Peterburg to take over as interim CEO. Though Oppenheimer analyst Derek Archila believes the “exit likely creates near-term uncertainty for shares,” he nonetheless maintains conviction that the biotech firm continues in solid standing for the long-term.

Therefore, even taking into account volatility likely to swirl in the first half of 2017, the analyst reiterates an Outperform rating on shares of TEVA without listing a price target.

Archila acknowledges the apprehensive investors, opining, “The company is undertaking a search to identify a permanent CEO, a process that we believe will likely take several months. Erez’s tenure, which began in February 2014, saw TEVA expand the company’s global generics business through the acquisition of Actavis, making it the largest generic company in the world. However, the deal was expensive, leaving the company saddled with ~$37B in debt and around ~5.0x levered (net debt/EBITDA). That, coupled with the recent headwinds to the company’s generic business requiring TEVA to lower their previous 2017 guidance and recent invalidation of the Copaxone 40mg patents, have left some investors questioning management’s execution and also wondering if we have hit the bottom for shares.”

Yet, ultimately, “With shares trading at a 10-year low, we still like TEVA on valuation and believe improving fundamentals in the company’s US generic business in 2H17 will drive shares higher,” Archila concludes, betting on the firm’s ANDA pipeline, genetic portfolio, and integrated generics business.
According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, two-star analyst Derek Archila is ranked #2,540 out of 4,382 analysts. Archila has a 44% success rate and earns 1.9% in his yearly returns. However, when recommending TEVA, Archila loses 2.0% in average profits on the stock.

TipRanks analytics demonstrate TEVA as a Buy. Based on 21 analysts polled by TipRanks in the last 3 months, 12 rate a Buy on Teva stock while 9 maintain a Hold. The 12-month average price target stands at $42.68, marking a 32% upside from where the stock is currently trading.

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