DepoMed Inc (DEPO) PT Lowered to $13 at Mizuho Securities, Raises Probability Of A Takeout To 50%

Mizuho Securities lowered its price target on DepoMed Inc (NASDAQ: DEPO) to $13.00 (from $16.00) while maintaining a Neutral rating.

Analyst Irina Koffler comments "We expect weakness in the stock as investors digest the soft 1Q:17 guidance and consensus estimates come down. However, we also expect the stock to stabilize around some expectation of a company sale at a materially lower valuation."

Addressing a probable takeout due to Starboard's involvement, Koffler comments (emphasis from Street Insider) "With Starboard remaining involved, we have raised our expected probability of takeout from 30% to 50%, but at a much lower EV/Sales multiple of 3.5x, applied to 2017 sales of $457.7M. This generates a hypothetical $16 takeout value for the stock, and may still allow Starboard to record a modest gain on its initial investment. Our standalone value has contracted to $10 from $13 due to lower revenue estimates, but we also assign a lower probability to this outcome (50% vs. 70% previously). An equally weighted blend of these two methodologies generates our new $13 PT."

She lowers her FY 2017 EPS estimate from $1.09 to $1.05 and also lowers her FY 2018 EPS estimate from $1.60 to $1.54.

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