Mizuho Upgrades Valeant Pharmaceuticals Intl Inc’s (VRX) As Short Thesis Has Been Debunked

In a research report issued this morning, Mizuho analyst Irina Rivkind Koffler upgraded shares of Valeant Pharmaceuticals Intl Inc (NYSE:VRX) from Underperform to Neutral, while raising the price target to $25 (from $10), which represents a slight upside potential from current levels. The analyst believes that there is now a lower likelihood of stock collapse from another guidance miss, as the company plans to divest assets and indicated it would amend its debt covenants to avoid default triggers if EBITDA slips below the lower end of guidance.

Koffler noted, “Because VRX can relax its interest coverage covenants, we just don’t think it will matter as much if the company misses its guidance in future quarters. Therefore, our short thesis has been debunked and we move to the sidelines instead.”

The analyst continued, “Given our lack of visibility into the surviving segments and longer term sales, we no longer think that DCF valuation makes sense for this stock. Instead we value Valeant using an updated sum of the parts (SOTP) analysis that relies primarily on management’s bullish forecasts for each segment.”

According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Irina Rivkind Koffler has a yearly average return of 25% and a 60% success rate. Koffler has a 21.1% average return when recommending VRX, and is ranked #16 out of 4120 analysts.

Out of the 26 analysts polled by TipRanks, 8 rate Valeant stock a Buy, 13 rate the stock a Hold and 5 recommend Sell. With a return potential of 125%, the stock’s consensus target price stands at $56.18.

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