Despite making no major announcements, the share price of Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA) rose 8.25% in New York on Friday on a higher than average turnover - the fourth day in a row that the company's share price has risen, giving some relief to Teva's battered investors. The share price is 8.61% higher on the Tel Aviv Stock Exchange today, after rising 4.77% on Thursday and 1.64% on Wednesday.
At the same time, even after the steep rise, the share price has not returned even to the level at which it was traded before the company published its third quarter results in early November. The share price lost 47% of its value in the third quarter after Teva published poor second quarter results, cut its dividend, and downwardly revised its guidance for the year. The company's third quarter results were also weak, and included another downward revision, after it became known that Mylan N.V. (Nasdaq: MYL; TASE: MYL), Teva's competitor, had obtained approval for marketing a generic version of Copaxone, Teva's flagship product.
In any case, following the surge on Wall Street late last week, Teva's share is now trading 23.2% higher than the low point it reached following the publication of the company's third quarter results. Trading in Teva's share resumed today on the Tel Aviv Stock Exchange (TASE) with a positive arbitrage gap, and the price jumped 9% and led the surge in the Tel Aviv 35 Index.
A positive scenario from Japan
There was no clear reason for the rise in Teva's share price; the company published no announcement, and the investment houses covering the share published recommendations in the past few days with target prices lower than the current market price. For example, Cantor Fitzgerald reiterated its "Hold" recommendation with a $10 target price, 27.7% lower than the share price in New York, and Japanese investment house Mizuho cut its target price from $15 to $12, 13.3% below the current price, while retaining a "Neutral" recommendation for the share.
At the same time, Mizuho's economists did provide a rather positive scenario for Teva's investors. They believe that if Teva manages to stabilize its business and present a way for achieving a 4.5 leverage ratio (meaning $5.5-6 billion in EBITDA), the company will probably be able to avoid a downgrade of its rating to junk bonds (Fitch has already given Teva's debt a junk bond rating, but the relevant rating agencies for the debt holders are S&P and Moody's). Mizuhu writes that if new CEO Kare Schultz takes the necessary measures, including a reduction in the dividend, Teva will be able to achieve the leverage ratios required of it, thereby avoiding a downgrade in its rating.
Published by Globes [online], Israel Business News - www.globes-online.com - on November 19, 2017
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