Citi, among the few investment banks with a "Buy" recommendation for Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA), cut its target price for the stock today. The bank retains the "Buy" recommendation, but with a price target of $13. The bank's previous target was $23. The new price target is still 58% above the share's market price in New York.
Citi says that Teva's current price level reflects investors' concerns over additional debt that the company will incur because of the opioid litigation against it in the US. Depending on the multiple assumed, Teva's current price implies an addition of $5-10 billion debt.
Analyst Liav Abraham writes that Teva faces a complex situation. "We have conducted extensive legal due diligence in the attempt to fully understand the complexities associated with this unprecedented legal situation," she writes, but nevertheless "we acknowledge that we are left without definitive answers to several of our key questions, including the legal liabilities that are likely to be incurred as a result of the litigation, and the timelines for resolution." Despite this, she expresses the view that "The litigation around the country is most likely to ultimately be resolved via a global settlement between all parties involved." Teva is one of several companies being sued for selling opioid painkillers that led to patients becoming addicted.
"We are removing the stock from Citi’s Focus List, as near-term opioid-related catalysts are unlikely to alleviate investor concerns, in our view. Given Teva’s stable cash flows over the longer term, we maintain our stance on the company’s ability to de-lever over time (though we acknowledge the timelines may be more protracted if additional debt is assumed to resolve the opioid litigation), hence our continued Buy rating on the name, for now," Abraham writes.
Published by Globes, Israel business news - en.globes.co.il - on June 17, 2019
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