Buy Valeant Pharmaceuticals (VRX) Ahead of Investor Day Catalyst - Guggenheim
Guggenheim analyst Louise Chen reiterated a Buy rating and $195 on Valeant Pharmaceuticals (NYSE: VRX) saying the stock has bottomed and multiple expansion will drive shares higher. Chen recommends buying ahead of the December 16, 2015 investor day catalyst.
"Concerns regarding high-priced drugs and specialty pharmacies have weighed on VRX shares since mid-September, but we believe the sell-off is now overdone (VRX down 62.4% since 9/18 vs. S&P 500 up 6.7%)," Chen commented. "Therefore, we recommend buying VRX shares ahead of the company's Analyst Day, on 12/16/15, and ~5 new drug launches, with blockbuster potential, in '16. Although VRX may lower its '16 EBITDA guidance of ~$7.5B, we think this is already expected, and multiple expansion could drive VRX shares higher in '15+. Multiple expansion could come from brand pipeline advancements, execution of stated business objectives, and capital allocation. Finally, VRX is inexpensive. The stock trades at 6.3x '16E consensus EPS, while its peers trade at, on average, 14.6x. VRX has a 15%-20% 3-year EPS CAGR while its peers have, on average, an 8% 3-year EPS CAGR. Even if one believes the allegations of fraud for VRX's legacy business, we believe the company's $30B market cap is justified by B&L and Salix (VRX bought B&L and Salix for $8.7B and $15.8B, respectively)."
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Shares of Valeant Pharmaceuticals closed at $87.41 yesterday.