Dead Cat Bounce, Or is a Sustainable Relief Rally in Store for Valeant (VRX)?

Citron Research founder Andrew Left's decision to step back from publishing incremental negative research on Valeant (NYSE: VRX) does absolutely nothing to change the fact that there are things we simply don't know about the company's financials, however it does temporarily remove the threat of death by 1000 tweets. This could open the door for analysts who had been supportive of the company to suggest that at 45% below its 50 day moving average, buying a small position may be worth the risk.

Some say if Citron truly had a "kill shot" it would be publicly available by now and CNBC reporters would be tripping over WSJ reporters to make it public. More likely, it has a piece of the blueprint of a smoking gun that could relate to much more than the 6% of sales that Philidor comprises. It may be a much bigger issue but it also may take time to find the pieces let alone put them all together.

Goldman Sachs analyst, Gary Nachman, downgraded the stock today based on expected increased scrutiny on pricing, concern over specialty pharmacies, and fewer M&A opportunities. He reduced the price target to $122 from $180, however, this price target still represents 20% upside from current levels.

Jefferies, on the other hand, may have bottom ticked the stock when the price was $94. David Steinberg, Jeffries Specialty Pharma Analyst, reviewed the same datapoints, maintained his Buy rating and arrived at a price target of $172, based on zero future contributions from Philidor, by taking a 10.4x multiple of FY17 EPS ($16.97, down from $18.54 previously).

Note that neither of these two estimates allow for Rxs flowing into other channels.

Shares of Valeant are up 7.4% today to $100.71.

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