Valeant Pharmaceuticals Intl Inc (NYSE: VRX)
Valeant Pharmaceuticals has had an incredibly rough time in the market. However, at CNA Finance, we see big upside potential for the stock. With that said, we have decided to set the price target for VRX at $69 per share over the next 12 months. Today, we’ll talk about why the stock has fallen so far, and why we believe that it’s going to climb from here.
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Why VRX Has Had Such A Hard Time In The Market
The hard times for Valeant Pharmaceuticals started in late 2015. At the time, the stock was trading at well over $100 per share. However, an analyst firm known as Citron decided to look into the company for obvious reason. When they did so, they found something that proved to be incredibly concerning. It appeared that VRX was using its relationship with its largest customer, a pharmacy known as Philidor, to pad the numbers and make it seem as though the company was performing better than it actually was. As a result, Citron published a report calling Valeant Pharmaceuticals the Enron of the pharmaceutical industry.
Once the Citron report was published, we saw massive declines on VRX, and for good reason. After all, investors don’t like being lied to. After independent investigations, it was proven that Citron was telling the truth and VRX had been in the wrong. After that, the stock fell dramatically, finding support at just over $30 per share after giving up about 70% of its value.
Why We Are Bullish On Valeant Pharmaceuticals
There’s no denying the fact that VRX did the wrong thing here. They used a relationship with Philidor to pad the numbers, and that hit investors hard. However, recently, we’ve seen several positive changes within the company. This is why we have set the bar pretty high with regard to growth in VRX over the next year. Here are the changes that we view as most important:
- Walgreens – Shortly after announcing that it would be canceling its agreement with Philidor, Valeant Pharmaceuticals announced that it had entered into an agreement with Walgreens. Under the new agreement, one of the largest pharmacies in the world would now carry VRX branded products. While this doesn’t make up for the total sales lost due to the cancellation of the Philidor agreement, the Walgreens agreement was a great start.
- Resignation of CEO – Recently, it was announced that J. Michael Pearson would be resigning from his position as CEO of VRX. We are incredibly pleased with this move as the blame for any scandal always falls back on the CEO. Today, Joseph Papa, a well respected member of the pharmaceutical sector, is heading up Valeant Pharmaceuticals and we believe that he will do incredibly well in this position.
- Addition of board members – Shortly following the Philidor scandal, it was announced that VRX would be adding two new members to its board. One of those members is activist investor Bill Ackman, who has already made incredible moves with his new position.
With the changes the company has made since the Philidor scandal and the support we’ve seen in the market at current price levels in mind, we believe that the stock has quite a bit of upward potential. As mentioned above, we are expecting that VRX will climb to $69 per share over the next year. At the end of the day, with the changes that Valeant has made, the company is now incredibly undervalued, and those who take advantage of the opportunity to get involved will likely enjoy the fruits of their decisions!
What Do You Think?
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Where do you think VRX is headed and why? Let us know your opinion in the comments below!
[Image Courtesy Wikipedia]