JPMorgan analyst Chris Schott reviewed Valeant Pharmaceuticals Intl Inc (NYSE:VRX) on Thursday, April 20, who lowered his price target by roughly 33.33% from $15 to $10. However, the analyst reiterated his Neutral rating on VRX, following small to medium Specialty Pharmaceuticals’ review ahead of the beleaguered drug maker’s first quarter of the fiscal year 2017 (1QFY17) financial report. Consequently, the pharmaceutical’s shares traded in red and declined 1.55% during active trading yesterday.
According to Mr. Schott, Valeant’s 1Q set-up appears reasonable, but he remains cautious in the longer term. In his updated thesis, the analyst suggested that sentiment for the group seems to be reaching a floor, as he noted few names received positive bumps owing to their recent management shifts, rising generic merger and acquisition interest, and surprising EBITDA performance. However, he commented, “Yet concerns remain regarding the sustainability of generic pricing metrics, coupled with the high leverage facing the management teams of this group.”
The analyst further suggested a potential upside to Wall Street’s earnings per share (EPS) estimates, driven by the company’s near-term efforts. However, he believes that the $3.05 billion company’s long-term outlook remains shaky, due to uncertainty surrounding franchise recovery. Nonetheless, Chris expects core product performance to take center stage, coupled with a positive catalyst in upcoming Siliq launch. In contrast, the analyst advises to remain skeptical about the management’s debt refinancing, repayment, and asset sales efforts.
Despite rising uncertainty in future, Wall Street analysts remain bullish. They have presented a 12-month average price target of $18.91, suggesting more than 110% upside potential over drug maker’s last closing price. The analysts at FactSet Fundamentals have also maintained three Buy, one Overweight, 14 Hold, one Underweight, and three Sell ratings for Valeant.