Valeant Pharmaceuticals Intl Inc (VRX) Bear Boosts Price Target Amid Solid Turnaround Efforts

Mizuho's Irina Rivkind Koffler cannot "justify" changing her rating on Valeant. Instead, the analyst lifts her price target by 40%; Here's why.

Valeant Pharmaceuticals Intl Inc (NYSE:VRX) almost shook off a bear from its tail amid some impressive turnaround efforts to “deftly” refinance debt. Though under the current valuation, the analyst simply cannot merit a step up to the sidelines, she is shedding some pessimism at last.

Mizuho analyst Irina Rivkind Koffler all the same does look for a “negative” reaction to the comeback stock of the Street in terms of the 2018 guide and underscores fears of a dilutive financing event, especially considering the latest rally. Speaking of the recent strength in shares, the analyst acknowledges: “We were going to upgrade VRX but the stock ran away from us.”

Therefore, the analyst reiterates an Underperform rating on VRX stock while hiking the price target from $7 to $10, which implies a nearly 49% downside from current levels. (To watch Koffler’s track record, click here)

More on Valeant: Valeant Pharmaceuticals Has A New Bear In Town

“Shares had meaningful move post-2020 debt refinancing and we believe the credit market could be anticipating a dilutive equity event to further de-lever the business. We think: 1) Valeant could meet 2017 guidance and beat consensus estimates in 4Q:17 due to momentum (or channel activity) in Salix. 2) We estimate 2018 revs of $7.96B and adj. EBITDA of $3.23B vs. $8.47B and $3.27B FactSet consensus. Valeant noted $280M in EBITDA impact from divestitures in its 8-K filings and an additional $467M in EBITDA impact from LOEs next year and we added cost-cuts from the asset sales but raised R&D and tax. 3) We think the company could do something dilutive with the stock at these levels and therefore see additional downside risk to shares. While 2018 EBITDA guidance may not be that disappointing, we stay with the Underperform thesis in front of that remaining event,” contends Koffler.

TipRanks mostly shows a bearish Street running for the hills on the recovering biotech giant, with just one bull rating a Buy on Valeant stock, a majority of 6 maintaining a Hold, and 4 issuing a Sell on the stock. With a loss potential of nearly 21%, the stock’s consensus target price stands at $15.56, indicating Valeant still is not out of the woods with Wall Street sentiment just yet.

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