Teva: A "Buy Low" Bet

01/31/2017 10:00 am EST


Jimmy Mengel

Editor, Outsider Club

Opioid drug abuse has become a national epidemic; Teva Pharmaceutical Industries Limited (TEVA) has just developed a drug that could potentially deliver pain relief without the scourge of addiction, suggests Jimmy Mengel, editor of The Crow's Nest.

Teva is an Israeli company that specializes mainly in generic drugs. Their “non-addictive” painkiller Vantrela ER was just approved by the FDA. Vantrela ER is a pain killer with built-in features that deter abuse.

Meanwhile, Trump's recent said that drug companies were “getting away with murder.” He called the drug industry practices “disastrous” and threatened to involve the government in negotiating drug pricing.

I think he was being a bit blustery, as he is won't to do, but if he does go forward with his war on price gouging, Teva's generic drug business should do just fine. They are also somewhat insulated from U.S. price wars since only 50% of its revenue comes from the U.S.

Now, it can be hard to pull the trigger on a company that has trended down and released downgraded projections. But, as they say: “Buy when there is blood in the streets.”

Lucky for us, there really isn’t too much blood -– it seems like merely a flesh wound, and certainly not a serious bloodletting.

Many analysts have set lower price targets lower after the start of 2017:

* Maxim cut its price target to $41 from $49.

* RBC reiterated its Outperform rating but lowered its price target to $42 from $51.

* Cowen reiterated its Buy rating but slashed its price target to $50 from $100.

The stock currently trades around $33, so there is double digit upside from even the most conservative estimates. And you get a 4% dividend.

As they say, buy low, sell high. This is a prime opportunity to do it. We're buying Teva Pharmaceutical under $38 a share.

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