Contrarian Value Ideas

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>>> Teva Breaks Down to Fresh Lows – Will It Bottom Out?



By Justin Kuepper

May 23, 2017



https://finance.yahoo.com/m/145d684d-c188-3b90-9eec-25f25d52dc3e/ss_teva-reaches-new-lows-%E2%80%93-will.html



TEVA has experienced a rough year with shares falling more than 20% since January and nearly 45% over the past 52 weeks.

The company reported first quarter revenues that increased 17% to $5.63 billion—missing consensus estimates by $50 million—but reported earnings per share of $1.06–surpassing consensus estimates by three cents. While shares rose following the results, the performance wasn’t enough to sustain a rally, and they soon continued their march lower.

Investors have several concerns that have been weighing on the stock, including Allergan’s plan to sell about 100 million shares of stock obtained from the Actavis deal during the third quarter. This could put downward pressure on the stock price at a time when it has already been suffering from uncertainty about the company's CEO, losses mounting in Venezuela, and upcoming generic competition for its popular Copaxone drug.

Despite these concerns, Teva’s sub-$30 billion market capitalization has piqued the interest of many value investors. The Actavis acquisition helps strengthen the company’s position in generics while it continues to progress with its branded drug and biosimilar pipelines. Many analysts continue to be bullish on the stock given these prospects, including Cowen & Co. with a $50.00 price target and Maxim Group with a $35.00 price target.

From a technical standpoint, the stock broke down from trend line and S1 support at $30.22 to fresh lows beneath S2 support at $28.85. The relative strength index (RSI) suggests that the stock may be oversold with a reading of 30.55, but the moving average convergence-divergence (MACD) recently experienced a bearish crossover. These dynamics suggest that selling pressure could begin to abate over the coming days, but the long-term trend remains downward.

Traders may want to lock in profits on any short positions and perhaps watch for signs of a turnaround to establish a riskier long position.

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