Cantor Fitzgerald analyst Louise Chen weighed in on Valeant Pharmaceuticals Intl Inc. (NYSE:VRX) on Thursday, June 15, and initiated the coverage on the stock with an Overweight rating. The analyst also set the price target at $18, indicating a 48.5% upside trend to the current market levels. However, despite bullish comments, the drugmaker's shares traded in red yesterday and plunged approximately 2.73% during active trading.
According to Ms. Chen, the firm's rating and price target reflect a greater appreciation for Valeant's solid execution recently. Moreover, she stated that she remains optimistic about the pharmaceutical's growth prospects. She also thinks that the company's new management is likely to drive the fiscal year 2019 earnings revisions upwards, resulting in higher share momentum and multiple expansions.
In her updated research note issued to clients yesterday, Louise further highlighted reasons for liking Valeant stock. She believes that the company can reduce its debt to manageable levels in the medium term, despite high concerns expressed by the other Street analysts. She further noted that potential investors remain cautious over future news regarding VRX, given increasing negativity surrounding the name. However, Louise pointed out that it is important to remember that negative headlines regarding the company have diminished meaningfully recently, compared to over a year ago.
Furthermore, Chen remains optimistic, as she believes that the Street can start giving the drugmaker more credit for its new drugs, as investors' confidence increases in Valeant's ability to lower debt. Therefore, the analyst established Valeant's FY17 and FY18 earnings per share estimates at $3.56 and $3.75, respectively.
In contrast, the Wall Street analysts have reiterated their price target at $14.86, reflecting a 22.6% upside potential over the last close. Additionally, according to FactSet Fundamentals, the analysts have also published two Buy, one Overweight, 12 Hold, one Underweight and four Sell ratings for Valeant.