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On Wednesday, UBS maintained a bullish stance on Teva Pharmaceutical Industries Ltd. (NYSE: NYSE:TEVA) shares, raising its price target to $24 from $22 while keeping a Buy rating on the stock.
The firm's confidence in the pharmaceutical company remains high, despite Teva's shares experiencing a decline of approximately 10% over the past three weeks due to various market disturbances.
The analyst from UBS highlighted several key factors supporting the positive outlook for the second half of 2024. Among these is the anticipated sale of Teva's active pharmaceutical ingredient (API) business, which is expected to generate proceeds between $4.8 billion and $6.8 billion. This influx of cash could accelerate the company's debt reduction efforts.
Another significant event on the horizon for Teva is the upcoming decision on TL1a, a drug currently in Phase 2 trials. The UBS analyst anticipates positive data from these trials, citing previous mechanistic validations that suggest a favorable outcome. The go/no-go decision for TL1a is expected in the late third quarter or early fourth quarter of 2024.
Furthermore, UBS projects that Teva may outperform its full-year 2024 financial guidance. The firm's current estimates for Teva's 2024 sales and EBITDA stand at $16.2 billion and $4.9 billion, respectively. These figures are not only at the high end of Teva's own guidance but also surpass the consensus estimates of $16.0 billion in sales and $4.8 billion in EBITDA.
The increase in the price target to $24 is primarily driven by a higher enterprise value to the estimated 2025 EBITDA multiple for Teva's mature business segment. UBS has adjusted this multiple to 7.0 times from the previous 6.5 times, which is in line with the rising peer average multiple. This adjustment reflects a more optimistic valuation of Teva's established business operations moving forward.
InvestingPro Insights
As Teva Pharmaceutical Industries Ltd. (NYSE:TEVA) navigates through a period of market volatility, insights from InvestingPro reveal a mixed financial landscape with key metrics to consider. Teva's market capitalization currently stands at $18.45 billion, reflecting its significant presence in the pharmaceutical industry. The company's revenue growth over the last twelve months as of Q1 2024 has been positive at 7.23%, indicating a robust business performance despite challenges.
InvestingPro Tips highlight Teva's high shareholder yield and the expectation of net income growth this year, which align with UBS's bullish outlook. Additionally, Teva's large price uptick over the last six months, amounting to a 37.6% total return, may catch the eye of investors looking for momentum in the pharmaceutical sector. However, analysts have expressed caution, with three revising their earnings downwards for the upcoming period, and it's worth noting that the company has not been profitable over the last twelve months.
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