To The Moon

U.S. stocks rallied to close out the trading week on Friday after two lackluster sessions as a cooler-than-expected inflation report and comments from Federal Reserve officials eased worries about the path of interest rates.

With December so far delivering Scrooge-like returns in an otherwise stellar year for U.S. stocks, investors hope the tail end of 2024 offers some holiday cheer, but warn of potential headwinds.

The best-performing concepts is Birth Control.

Considering the different perceptions of the stock, this time TigerPicks chose $Teva Pharmaceutical(TEVA)$ $Walgreens Boots Alliance(WBA)$ to have a fundamental highlight to help users understand it better.

$Teva Pharmaceutical(TEVA)$

Teva Pharmaceutical Industries Ltd. is a global generic pharmaceutical company headquartered in Israel, selling traditional generic drugs as well as its own portfolio of branded medicines.

It is among the three largest such companies in the world, with over half of sales coming from North America (51%), the remainder mostly coming from Europe (31%) and international markets (12%).

1.The Fall of Teva: Patent Losses and Debt Burden

Since topping around $72/share in August 2015, a number of factors caused a collapse in the stock price. Most importantly, patents on Teva's best selling drug Copaxone were ruled invalid, exposing sales of Copaxone to generic competition.

Copaxone accounted for $4 billion in annual sales, nearly 20% of Teva's revenue. As a result, from 2016 to 2019, revenues fell from $21.90 billion to $16.89 billion, largely driven by low-priced generic competition. Importantly, while Teva is a generic pharmaceutical company, it has invested in developing its own brands, leading to a boom and bust cycle, which in this case blindsided investors who had expected Copaxone patent protection to extend until 2030.

Another factor in Teva's fall between 2016 and 2019 was pressure on generic drug prices. Consolidation of customer pricing power in generic drugs placed great pressure on manufacturers of generic drugs. Teva was not immune and unfortunately closed on an acquisition of Actavis Generics in late-2016 for a total of over $40 billion in cash and stock. The merger bloated Teva's debt load at precisely the wrong moment, creating a perfect storm for Teva, whose stock price fell nearly 90% to the $7/share range in 2019 and 2020.

2.Teva's Turnaround: Strong Momentum and Growth Potential

After several years of consolidation and incremental improvements to the business, Teva's stock has gained momentum, more than doubling from the lows to around $18/share. In the stock market, it is rare for a company to 'boomerang,' losing most of its value only to regain it later. However, Teva may have the opportunity to accomplish just that.

With debt being paid down to a more reasonable threshold, price deflation in generics halted and a plethora of new products on the Horizon, Teva may be able to extend its run toward all-time highs over the next 5 years. Even following the past year's rally, Teva appears very cheap, trading at 6.35x expected 2025 earnings and 1.18x 2025 sales.

3.Teva's Opportunity

At the start of the last decade, big pharma lost patent exclusivity on many small-molecule drugs that had fueled growth. This 'patent-cliff' around 2010 was so substantial that it stalled many large pharmaceutical companies for years, but preceded substantial opportunities in the stocks of generic pharmaceutical companies. These opportunities in some cases spiked into disastrous excess: Teva being a benign example compared to Valeant and Turing Pharmaceuticals, which epitomized the excesses wrought from a deluge of new generic revenues.

Today, an even larger loss of patent exclusivity looms, with more than $200 billion in annual revenue at risk through 2030. Many of the brand name drugs losing exclusivity are biologic products and the companies most poised to benefit must execute effectively this area. These drugs have names synonymous with pharmaceutical blockbuster products, including: Humira, Keytruda, Opdivo and Eylea.

With multiple products already on the market, Teva has proven its credentials in this area while also navigating the early stages of a turnaround. Over the coming 12-months there are many opportunities in generic and biological drugs that have the opportunity to expand the company's revenues and earnings. Teva is rated as a strong buy with a price target equal to the DCF valuation ($23.50/share) a 30% premium to the market price. This price is 8.4x the consensus analyst estimate for 2025 earnings ($2.80/share).

4.Stock Price Forecast:

Here are the target price forecasts for the next 12 months from analysts.

Based on 6 Wall Street analysts offering 12 month price targets for Teva Pharmaceutical in the last 3 months. The average price target is $23.00 with a high forecast of $26.00 and a low forecast of $18.00. The average price target represents a 4.12% change from the last price of $22.09.

Resource:

https://seekingalpha.com/article/4742525-teva-stock-rebounded-from-lows-new-product-launches-strong-buy

What are your thoughts on $Teva Pharmaceutical(TEVA)$ ?

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