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Teva Long-Term Prospects Bright, Despite Headwinds
Stock Analysis & Ideas

Teva Long-Term Prospects Bright, Despite Headwinds

Teva Pharmaceuticals (TEVA) is a generic drug manufacturer. The firm provides patent treatments for migraines and multiple sclerosis in addition to generic versions of products.

During the previous five years, Teva had to cope with a slew of negative news. The business was accused of bribery by U.S. regulators, dividends and yearly bonuses were suspended, and patent exclusivity for its top-selling drug, Copaxone, was lost.

As a result, the stock dropped around 76% in the last five years and 10% in the last year.

However, the firm appears to be returning to a growth track under the direction of CEO Kare Schultz.

Strengths

Teva offers a wide range of products, including more than 500 generic medications. The firm has a dominant position in the world’s largest generic market, the United States. Teva is also aiming to improve its position in important emerging generic markets, where generics penetration is low but growth and profitability opportunities remain high.

Furthermore, the corporation is working hard to lower its debt load. The company’s management has undertaken a number of efforts, including the sale of non-core assets, the divestment of production sites, and the use of operational cash flow to pay down debt. As a result, Teva’s debt was lowered to $23.7 billion at the end of Q3.

When it comes to Teva’s financial situation, the firm has a healthy cash flow position and consistent sales. Cash flow climbed 72% year-over-year to $529 million at the end of the third quarter, while free cash flow increased 57% to $795 million. Although sales fell 2% year-over-year to $3.89 billion in the third quarter, it has remained constant, averaging $3.9 billion each quarter.

I believe the company’s ongoing efforts to lower its debt, coupled with strong cash flow generation capabilities, may enable Teva to resume dividend payments in the near future, improving the stock’s appeal among investors.

Wall Street’s Take

On TipRanks, Teva stock commands a Hold consensus rating, based on 2 unanimous Holds. As for price targets, the average TEVA stock price prediction of $10 implies almost 18% upside potential from the current levels.

Bottom Line

Teva should benefit in the long-term from the growing use of generics. Furthermore, a strong product pipeline and strength in the company’s patented drugs, along with growing access to healthcare services, should boost Teva’s stock price in the future.

However, the opioid crisis, which was sparked by deceptive marketing techniques and resulted in multibillion-dollar fines for Teva, rising inflation, and the impact of the COVID-19 pandemic might all have a short-term negative influence on the stock price.

Disclosure: At the time of publication, Shalu Saraf did not have a position in any of the securities mentioned in this article.

Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of TipRanks or its affiliates  Read full disclaimer >

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