The quarterly and annual financials of Teva Pharmaceutical Industries (TASE: TEVA; NYSE: TEVA) released last Wednesday sent the company’s share price tumbling 13.9% on the day, and the slide continued on the following days as well. At the close in New York on Friday, Teva, headed by Richard Francis, was at $17.73, giving it a market cap of $20.2 billion, representing a fall of more than $4 billion within three sessions.
The market’s disappointment was provoked by Teva’s guidance for 2025. At the mid-range of the guidance, the company expects to post non-GAAP earnings per share of $2.5 and free cash flow of $1.75 billion. The revenue guidance was similar to analysts’ estimates, at $17.1 billion in the middle of the range. In 2024, revenue grew to over $16.5 billion, with a net loss of $1.6 billion on a GAAP basis and a net profit of $2.86 billion on a non-GAAP basis.
What do the analysts say?
Following the release of the quarterly report, Bank of America cut its price target for Teva from $26 to $23, a price that represents a 29.7% premium on the price in New York. The bank’s rating remains unchanged, at "Buy". In its forecasting model, the bank has revised the company’s profit margins downwards, but points out that it is investing in its innovative products. It sees Teva as attractive not just because of these products, but also because of the continued decline in its leverage through reduction of its debt, with the main event in this respect expected to be the sale of its active-pharmaceutical ingredient (API) business in the first half of this year.
Piper Sandler says that Teva should not have been "punished" for its guidance. It says that there was perhaps room to complain at the fact that operating profit is not expected to grow this year despite the growth in revenue, but that the context is large investment in R&D and in promoting the original drugs Austedo and Ajovy. Piper Sandler’s recommendation remains unchanged at "Outperform", with a price target of $30, 69.2% above the current market price.
Jefferies describes the fourth quarter results as mixed, and points out that EBITDA was lower than expected, and that it is not forecast to grow in 2025 either, as the company continues to invest in its pipeline. It recalls the jump in the share price in December last year following good results in the trial of a treatment for inflammatory bowel disease, and says that with that in mind the current weakness in the stock is not surprising. Jefferies estimates that the fears over EBITDA will pass, and at EBITDA multiples of 7-8 it sees a buying opportunity in Teva.
In general, despite the disappointment, most analysts have not changed their views on Teva. According to "The Wall Street Journal" data, most analysts currently have positive ratings for Teva, a small number is neutral, and no-one recommends selling the stock. The average price target is $24.71, representing a premium of 39% on the stock market price.
Published by Globes, Israel business news - en.globes.co.il - on February 2, 2025.
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