Valeant Pharmaceuticals Intl Inc (NYSE: VRX)
Valeant Pharmaceuticals has been a hot topic among the investing and trading community. Just months ago, the company was caught up in a scandal that caused its value to drop tremendously. While a good portion of the drop was justified, it’s clear, at this point, that the doomsday pictures painted by major media are what’s keeping the stock down. Today, we’ll talk about the scandal that started the declines, the doomsday outlook designed by big media, and the truth of the matter that will likely leave you shocked with regard to VRX’s potential to climb.
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The Scandal That Caused VRX To Spiral Out Of Control
The big scandal surrounding Valeant Pharmaceuticals was uncovered late last year. During this time, several analysts, and even government agencies, were investigating the company’s pricing practices. However, one firm decided to go further than pricing practices, and their investigation uncovered a big issue.
According to Citron, VRX had been misleading its investors through the use of its largest customer. A report was soon published calling the company the Enron of the pharmaceutical industry. Soon, more and more reports would surface with regard to the wrongdoing. In the end, this sent VRX into a tailspin. Unfortunately, after spiraling downward for months, the stock still seems to be on a path to doom. Don’t worry – it’s not so bad! I’ll explain later.
Big Media Is Painting A Doomsday Picture
While declines were justified up until about 2 months ago, much of what we’re seeing today is a reaction to a picture being painted by big media. Let’s face it, Valeant Pharmaceuticals is a big story. What drives more traffic than a perfect crime and the eventual fallout of the villain?
So, big media has been calling for big declines and really twisting things up in the process. Here are just a few examples of the picture media outlets seem to be painting:
- Jim Cramer Wrong? No Way! – Shortly after VRX signed the recent deal with Walgreens, Jim Cramer made the decision to comment on the topic. In his comments, he declared that the deal would be unprofitable. However, that’s not exactly the case. While some prescriptions sold through the deal will lose money, others will make money, and they will likely cover losses leading to profits. Will the profits be huge? Probably not. Will there be a loss? I don’t think so!
- Financial Struggles – No matter what news outlet you’re paying attention to, you’ve probably heard something about financial struggles at VRX. I’ve even read bankruptcy here and there. Let’s be clear here; the company is not struggling financially. You can see this by the company’s plans to pay debt off. During this year, Valeant will have to pay a minimum of $230 million in debt. If the company was struggling, that’s the amount it would pay, and it would be hard to do it. However, VRX is planning on paying far more than their minimum payments. In fact, throughout 2016, the company is planning on making debt payments that total $1.7 billion. I don’t think they could do this if they were up against the wall financially.
- Misinterpretations – One big misinterpretation that we’ve seen was seen when the new CEO at VRX said that the company would consider offers for core assets. After this, the bearish reporters painted a picture that the company needed to go on a fire sale in order to pay its bills. That’s not the case at all. What Papa likely meant in his statements was that, for the right price, anything is for sale. Nonetheless, this is yet another area where the bearish voice has been painting a grim picture.
Valeant Pharmaceuticals Is Ready For Big Growth
Although I hate to say it, in the short-term picture, we may see more declines on the stock. I don’t think it will go much further. I’d be shocked to see VRX fall below $20 per share. In the long run, however, I’m expecting to see a great recovery.
The reality is that VRX was wrong. There was a scandal, and that has hurt investor sentiment. However, at this point, the company has cut ties with Philidor, opened a relationship with Walgreens, changed CEOs, and added new members to the board. Since the scandal, we have seen a complete about face in the company, and I’m expecting that this will lead to long-run gains for Valeant Pharmaceuticals.
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What Do You Think?
Where do you think VRX is headed moving forward and why? Join the discussion at TalkTRENDZ from CNA Finance!
[Image Courtesy of Wikimedia]