Can Teva Turn Around its Four-Week Slide?

Ever since Teva Pharmaceuticals released its mixed first quarter earnings report, the company’s shares have been on a four-week fall.

Although Teva reported a 41% profit increase to $1.47 a share — beating estimates by 3 cents — Teva’s $5.1 billion in sales fell short. That day alone, the stock price slid 4% and as of Tuesday, May 29, the stock has fallen 14% from where it was before the first quarter report was released.

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The earnings report was released on May 9, and since then the stock hasn’t recovered.

According to Bloomberg, Piper Jaffray & Co. is recommending investors to avoid the stock, while Exane BNP Paribas cut its price target by 5% to $52.

Based on strong exposure to Europe, the company’s new chief executive officer, Jeremy Levin, had cut Teva’s 2012 revenue and sales guidance. Instead of the initial $22 billion in sales forecasted by Levin’s predecessor, Shlomo Yanai, the new 2012 sales forecast is between $20 billion and $21 billion.

After the new guidance was initially announced, the stock took a slight turn for the better, possibly because investors feared the new forecast would be worse; however, that optimism didn’t last long. Levin, who became CEO in May 2012, said during a conference call that Teva expects no growth from Europe.

But the news can’t be all bad for Teva. Of 38 analysts on Yahoo! Finance, 10 recommend the stock as a hold, eight as a buy and 12 as a strong buy. As a generic drugs maker, the company can expect demand to increase for its products as the consumer class in emerging markets expand, according to SeekingAlpha.

The Motley Fool has pointed out that Teva is offering a dividend yield of 2.5%, which is attractive to investors. Also, the site considered Teva’s accounts receivable trend to be encouraging.

“Receivable trends are encouraging because it helps to gauge whether the quality of sales, not just the quantity, is increasing over time,” according to the article.

And despite how low the stock is currently trading, the mean price target set by 22 brokers is $50.5, according to Yahoo! Finance.

Right now, Teva’s share price is at the lower end of its 52-week range, which runs from $35 to $51.15. By the middle of the day on Tuesday, Teva’s price was at $38.31.

The information contained in this article should not be construed as investment advice or as a solicitation to buy or sell any stock.

Read more:

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