Teva Pharmaceutical Industries Ltd (NYSE: TEVA) didn’t have the best of weeks in the market last week concerns with regard to the opiod market has led to fear among investors and a recent downgrade from UBS Capital Markets. However, an analyst upgrade announced today has investors buzzing, helping the stock to make a strong comeback.
So far today, TEVA is up by more than 7%, and looks like it will continue rising after Oppenheimer weighed in. Here’s what’s going on.
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Oppenheimer Upgrades TEVA
Oppenheimer analyst, Esther Rajavelu upgraded Teva Pharmaceutical Industries from perform to outperform. However, it’s worth mentioning that while Rajavelu did upgrade the stock, the analyst also greatly reduced the price target, dropping it from $17 to $12.
Much of the alure that Rajavelu sees in TEVA comes from the fact that the stock has been trading on serious weakness over the past year, giving up more than half of its value. As a result, the analyst noted that at current levels, the stock represents a strong buying opportunity.
The analyst also pointed to what he sees as improving business fundamentals and management execution with regard to the development and distribution of generic drug products.
Of course, Rajavelu didn’t skirt past the elephant in the room. legal uncertanties associated with the company’s activity in the opiod market could continue to hang over the stock. She estimated that the company’s opiod liability exposure is somewhere between $500 and $700 million.
As far as this exposure goes, we know that the company recently reached an agreement with Oklahoma that includes an $85 million payment to the state. Nonetheless, more than 40 states are currently involved in lawsuits against a variety of drug companies, looking for compensation for medical, law enforcement and treatment-related costs of the opioid epidemic.
Why The Upgrade Is Leading To Such Strong Gains
At the end of the day, the opioid epidemic is a major concern for investors in biotechnology stocks that take part in the production or sale of these drugs. However, it’s also worth mentioning that Oppenheimer is one of the most trusted analyst firms on the street.
Ultimately, the note suggests that Oppenheimer isn’t too concered about the opioid exposure issue. While the exposure is estimated in the hundreds of millions, the company’s recent declines led to it trading at a price that is highly undervalued in the opinion of the analyst, even with the exposure to opioid-related lawsuits.
So, the note essentially alleviated concerns while validating TEVA as a potentially lucrative investment opportunity.
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What Do You Think?
Where do you think TEVA stock is headed moving forward? Join the discussion in the comments below!
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