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Valeant: Analysts Will Start To Show Optimism


VRX did a good job stabilizing things with their earnings call last week, despite "criminal investigation" headlines that we debunked as old.

We think sell side analysts will see more signs for optimism and that this will drive the stock higher.

Mizhuo already started by upgrading VRX this morning.

By Parke Shall

Things have certainly looked like they have steadied for Valeant (NYSE:VRX). The company's last earnings report gave investors and analysts a little bit of hope that the worst may be over, and subsequently the stock moved up almost 25% in one day to recent term highs near $28. You can see this in the chart below,

VRX data by YCharts

Post-earnings, the company was mired by a headline about a criminal investigation that had been opened into the company. This sent panic shockwaves through the VRX shareholder base and it pulled the stock back from $28 to $25, as you can also see in the chart above.

We wanted to discuss today what we think will happen next and why Valeant could easily propel itself to over $30, on its way to our estimates which are closer to about $50.

We believe the next thing that is going to happen is that sell side analysts will begin to look at the VRX situation through a little bit more of a levelheaded lens and begin to issue more optimistic analysis on Valeant's future. We actually already saw that this morning with Mizhuo, who came out and issued an upgrade this morning on the basis of a sum of the parts valuation. Mizhuo had been one of the more vocal skeptics of Valeant on the way down, which is why we think this upgrade, despite its $25 PT, holds water. Street Insider reported,

Analyst Irina R. Koffler commented today:

  • VRX outfoxes the shorts via financial engineering, in spite of a 2Q:16 miss: Valeant reported rev of $2.4B and...