Teva Pharmaceutical Industries Ltd (TEVA) (ADR) Stock Points to a Slow but Steady Recovery, Says Mizuho

Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA) shares are climbing nearly 9% in Thursday’s trading session, after Warren Buffett’s Berkshire disclosed a $350 million brand new position in TEVA during the fourth quarter.

Berkshire’s TEVA investment makes sense, at least to Mizuho analyst Irina Rivkind Koffler. In a research note issued this morning, the analyst reiterated a Buy rating on TEVA stock, with a price target of $23.00. (To watch Koffler’s track record, click here)

Koffler commented, “We expect slow but gradual appreciation in TEVA shares. While the 2018 outlook introduced on the 4Q:17 call came in below expectations, we believe there is downside protection, and even longer term upside to the stock. We expect revenue decline to stabilize from a curated generics portfolio and pipeline contribution (mgmt. expects $200M in 2018 Austedo sales), and raised our terminal growth rate to -0.5%, from -2.0%. Teva uses a higher 2% terminal growth rate in its own generic forecasts but conceded in the 10-K filing that its U.S. generic business may not return to growth in 2020 (which is in line with our estimates). Additionally, we expect gross margins to stabilize and improve over time as the company becomes more streamlined and efficient. The business could become even more profitable over the next year because Teva may divest its distribution businesses like ANDA and Medis, and is exploring options for its OTC JV with P&G.”

If we turn to the Street in general, we can see that TEVA stock has a Hold analyst consensus rating. In the last three months, TEVA has received 5 buy, 11 hold and 4 sell ratings. These analysts have an average price target on the stock of $19.43. Given that TEVA is currently trading at $20.94 this suggests downside from the current share price of close to 8%. 


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