What: Shares of Valeant Pharmaceuticals (BHC -3.99%), a global drug and device company, romped higher by as much as 12% in midday trading after Bank of America/Merrill Lynch came to its defense in light of recent share price weakness and reinitiated coverage on the company.

So what: According to Sumant Kulkami, the covering analyst, Valeant is worthy of a 'buy' rating from his firm and a $290 price target, which represents about 84% upside from where Valeant stock closed on Tuesday. Kulkami's rating and aggressive price target were supported by his and his firm's belief that Valeant's product portfolio remains well-diversified, that it has a healthy pipeline, and that diversification helps reduce its future exposure to generic medications since losing a drug here or there to patent losses shouldn't be a profit killer.

However, Kulkami and his team also acknowledged that near-term volatility is likely to remain high on the heels of an early week subpoena from Congress requesting information as to why Valeant increased the price of two of its heart drugs by 525% and 212%, respectively. Despite the volatility, Kulkami believes the risk-versus-reward favors optimistic investors.

Source: U.S. Food and Drug Administration.

Now what: As a quick refresher, today's rebound in Valeant's stock follows a 35% cumulative tumble in the prior seven trading sessions. That tumble was set off by the unveiling of a prescription drug reform proposal set forth by presidential candidate Hillary Clinton.

The proposal offered by Clinton offered two worrisome suggestions for drug developers, including the idea that out-of-pocket monthly spending caps on eligible drugs for consumers would be set at $250, and that Medicare would use its prowess to negotiate better deals with drugmakers. All told, this could be a potential worry for drug developers that rely on high margins in the U.S. to recoup their research and development costs, as well as help to subsidize their ventures into emerging market economies -- and it's been a big reason why Valeant has had such a rough past week-and-a-half.

Additionally, it's important to recognize that analyst actions are short-term stock price drivers that rarely have any bearing on a long-term investment thesis. Long-term investors would be wise to not read much into today's analyst commentary, and instead should focus on the growth drivers that will be important to Valeant's long-term strategy, such as its ability to strike earnings-accretive merger and acquisition deals, and to bring new and innovative products to market.