Oil prices hold sharp losses with focus on secondary India tariffs
On Wednesday, BofA Securities made adjustments to its financial model for Teva Pharmaceutical (TADAWUL:2070) Industries Ltd (NYSE:TEVA), resulting in a lowered price target. While the firm maintained a Buy rating on the stock, the price target was reduced from $26.00 to $23.00, still above the current trading price of $18.83. The revision reflects a change in margin expectations, with a more conservative outlook on the company’s future performance. According to InvestingPro data, analyst targets for TEVA range from $21 to $30, suggesting potential upside from current levels.
BofA Securities analysts cited that the updated post-fourth quarter model revealed minimal changes to the top line but projected lower operating expenses and gross margins. For the fiscal year 2025, the analysts now expect a modest margin expansion of 50 basis points, compared to the previous 150 basis points. This adjustment is based on Teva’s gross margin forecast, which could potentially be conservative in light of potential positive shifts in the top line mix, including a $300 million increase in Austedo sales. InvestingPro data shows current gross profit margins at 49.84%, with revenue growing at 9.81% over the last twelve months.
Looking further ahead, between 2026 and 2029, BofA anticipates an increase in operating expenses ranging from $200 to $225 million, primarily to support investments in the TL1a clinical program. Despite these increased costs, BofA predicts that Teva will be able to grow its EBITDA to $5.2 billion by 2027, up from $4.9 billion in 2025. Current EBITDA stands at $4.79 billion, according to InvestingPro data, which also indicates strong financial health with an overall score of "GREAT". This growth is expected to be driven largely by high-margin brands and biosimilars, as well as the anticipated revenue from the generic version of the drug Revlimid, which could contribute an estimated $800 to $900 million.
The analysts also noted a slight reduction in the valuation multiple, from 9.5x to 9.25x, due to the slower rate of EBITDA growth, now forecasted at a 2% compound annual growth rate (CAGR) compared to the previous estimate of 4%. Current EV/EBITDA stands at 8.5x, suggesting room for expansion. Despite the adjustments, BofA Securities reaffirmed its Buy rating on Teva’s stock, emphasizing the undemanding valuation multiple and the potential revenue upside from the company’s pipeline. Based on comprehensive analysis available through InvestingPro’s Fair Value model, TEVA currently appears undervalued.
In other recent news, Teva Pharmaceutical Industries Ltd. reported fourth-quarter earnings that surpassed analyst estimates, with adjusted earnings per share of $0.71, compared to the projected $0.69. The company’s revenue also topped expectations, reaching $4.23 billion against the anticipated $4.1 billion. However, the company’s 2025 outlook fell below Wall Street forecasts, expecting earnings per share of $2.35-$2.65 next year, which is lower than the consensus of $2.78. The projected 2025 revenue is also lower, estimated at $16.8-17.4 billion, compared to analysts’ estimates of $17.09 billion.
Strong performance was seen from Teva’s key growth drivers in the fourth quarter. Sales of AUSTEDO, a medication for tardive dyskinesia and Huntington’s disease, increased 27% YoY to $518 million. Revenue from AJOVY, a migraine treatment, rose 11% to $63 million in the U.S. Generic product sales in North America also saw a slight increase of 1% to $674 million, boosted by new launches like the liraglutide injection.
Teva’s CEO Richard Francis mentioned that 2024 was a transformative year for the company, marking a second consecutive year of growth driven by generic products and innovative products. He noted that the company surpassed expectations for innovative products and accelerated its early-stage pipeline as part of its "Pivot to Growth" strategy. Despite the softer-than-expected guidance for 2025, Teva anticipates further growth from key products, supported by new launches.
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