Goldman Sachs And Credit Suisse Dissent
As always, there has to be an investment bank or two to dissent. First of all, Teva will need to restructure its debt, sell assets or raise equity. Investment bankers will do anything to get a piece of these deals. The quid pro quo is to give a “buy” rating on insolvent Teva in order to get a deal mandate. Credit Suisse upped the stock to neutral on the premise management is making the right moves with headcount reductions:
New TEVA CEO Kåre Schultz is moving quickly to try and turn TEVA around, and we expect investor sentiment on the name to improve with each move. First he merged the Specialty and Generics businesses while ousting the division heads in his first month on the job. Yesterday, still only 6 weeks in, he detailed an unexpectedly aggressive cost cutting plan that would reshape the company at each level across the globe. Successfully executing on the plan remains paramount, but we are encouraged by the CEO’s prior track record at Lundbeck and the plan he has laid out. We await more details on the plan and look for signs of successful execution before getting comfortable enough to fully recommend the stock, but we see things heading in the right direction.
Meanwhile, Goldman Sachs rated Teva a buy with a price target of $20. Apparently, Teva’s deleveraging is in play and generic pricing could bottom:
We see early signs of manufacturers exiting low profitable businesses, which could mark the bottom related to generic drug pricing. TEVA’s restructuring program will focus on optimizing its generics portfolio globally (getting out of low profitable products that don’t meet benchmarks) coupled with plant rationalization. Novartis is also looking at selling low profitable generics or discontinuing parts of its US generic business. We view this as a positive for the industry as less competition could lead to better prices. So far we’ve seen generic price deflation stabilizing in the high single-digit range, from low double-digit declines, even before some companies have started to reduce capacity.
With central bankers around the globe trying to spike stock prices because they don’t know any better, maybe Teva could touch $20. However, everybody cannot be right. The Shock Exchange says sell Teva and Goldman and Credit Suisse say the insolvent company is a buy. Who are riding with? Let us know in the comments section.
On Trump And The Global Economy
The second installment of Trump And The Global Economy Town Hall took place October 24th in Fort Greene. It Featured Professor Lance Brofman, Coconut Rob (Coconut Rob Smoothies), Wuyi Jacobs (AfroBeats Radio) and Ralph Baker, author of Shock Exchange: How Inner-City Kids From Brooklyn Predicted the Great Recession and the Pain Ahead.
The event was well-received by the community. We parsed through President Trump’s proposed tax plan and [i] how it was pure economic folly and [ii] high net worth individuals could potentially game the system by shifting income around. Apparently, Kansas Coach Bill Self did this when the state of Kansas cut taxes in the past. We discussed the pros and cons of technology on workers and the economy. How will the economy and country prosper under Trump’s leadership vis-a-vis Obama? What’s behind the verbal sparring with black athletes, ESPN’s Jemele Hill and North Korea’s Kim Jong Un?
