Shares of Bausch Health jumped in morning trading after the company formerly known as Valeant Pharmaceuticals was upgraded by an analyst who said the drugmaker is exhibiting earnings stability as well as the potential for long term growth.
'TIME TO TURN THE PAGE': Piper Jaffray analyst David Amsellem this morning upgraded Bausch Health, the company formerly known as Valeant Pharmaceuticals, to Overweight from Neutral while boosting his price target to $27 from $22. In a research note to investors, Amsellem said that while he has been "unrelentingly negative" on the company for years, he believes it is "time to turn the page" after taking a closer look at the business. Amsellem contends that Bausch's senior leadership team has positioned the company not only for longer-term EBITDA stability, but potentially meaningful long-term growth. While he noted that Bausch is still highly levered, Amsellem said that a favorable maturity schedule gives it "ample breathing room" and believes that strong visibility into EBITDA stability/growth should enable the company to "chip away significantly" at debt levels in the coming years. He thinks Bausch Health's valuation is positioned for multiple expansion over time
WHAT'S NOTABLE: As recently as July, Piper's Amsellem said he had "myriad concerns" regarding Bausch's commercial portfolio and pipeline, including doubts regarding where and when EBITDA will trough. On July 23, he said he did not believe the current valuation is "logical" given Bausch's "significant exposure to mature assets with questionable durability and leverage ratios that are still very much an eyesore. However, in September, the analyst upgraded Bausch to Neutral from Underweight, telling investors in a note partially titled "Time To Lay Down Our Weapons" that he could no longer argue that the company is not investable. At the time, he conceded that Bausch Health's annual EBITDA will trough at levels not much lower than its current 2018 guidance range of $3.2B-$3.35B.
OTHER RECENT ANALYST COMMENTARY: In December, H.C. Wainwright analyst Raghuram Selvaraju upgraded Bausch Health to Buy from Neutral and upped his price target on the stock to $58 from $25, saying that he believes now is an appropriate time to become more bullish on the story. The analyst added that he believes that the market has underrated and underappreciated the "tuck-in" and "complementarity-driven developments" of the past several months, while these have gradually begun to position Bausch Health "more strongly" in several core markets. Selvaraju also noted that Bausch's "stalking horse bid" for Synergy Pharmaceuticals (SGYP) "intrigues" him.
PRICE ACTION: In morning trading, shares of Bausch Health jumped 5% to $19.39.
Bausch Health
+0.86 (+4.65%)
Synergy Pharmaceuticals
+0.0217 (+19.69%)