Shares hit the rocks after the company reported its fourth-quarter and full-year results on Feb. 13. The key issue behind this sell-off was the company's soft guidance for 2019. Specifically, Teva issued a 2019 annual revenue guidance range of between $17 billion to $17.4 billion. Wall Street, on the other hand, was expecting a top-end figure of $17.9 billion, according to Factset consensus.
Rubbing salt in the wound, Mizuho also lowered its 12-month price target on the stock from $25 a share to $18, and downgraded the drugmaker's equity to neutral as well. The firm's key concerns are Copaxone's eroding sales in the face of generic competition, and the company's nearly $29 billion in outstanding debt.
Teva has made significant progress toward delevering its balance sheet over the past year, but Copaxone's somewhat faster-than-expected drop-off may hamper this effort moving forward. The bright side is that newer branded products like Austedo and Ajovy should start to pick up the slack in a meaningful way starting in 2020. Unfortunately, Wall Street and the company alike have 2019 pegged as another down year in terms of revenue growth.
Is Teva worth holding through this difficult chapter? If you already hold shares, the answer seems to be yes. Teva is poised to benefit from a host of favorable tailwinds in the next decade. So, despite some near-term turbulence, this top pharma stock should turn out to be a winner in the long run.