Teva Stock Is Getting Destroyed. Is Now The Time To Buy?

Teva (ADR: TEVA) has been a darling for investors in the generic drug sector. Even as recently as last year, investors were eager to see the growth of the company and along with it, the stock price. But then second quarter earnings were reported and Teva stock price hit the fan as they say.

Teva stock price has since cratered 45% since earnings were released and there is no sign of the price coming back. So should investors, particularly value investors take a look at Teva?

In this post, we will look at Teva stock and see whether or not there is a value play here or if you are better served putting your investing dollars elsewhere.

Teva Stock Is Getting Destroyed. Is Now The Time To Buy?

Teva Stock Drops After Earnings

Just looking at the raw numbers, the earnings Teva reported don’t appear to be terrible. Revenue came in at $5.69 billion, missing by $40 million. But this was an increase of 13%. Earnings per share also missed estimates by $0.05, coming in at $1.02.

But a closer look shows the full picture. Net income was down 20%. Cash flow was down 23%. Then executives pulled the plug. They slashed earnings estimates for the full year and cut the dividend by 75%.

So what exactly happened?

The Issues With Teva Stock

There are a handful of issues at play here when it comes to Teva stock. First, management is partly to blame. When Teva bought Actavis Generics from Allergan, they touted the added revenue and the cost savings that would come. Unfortunately, they drank too much of their own potion and really had no chance of meeting expectations.

But the issues don’t end there. Here are other issues Teva is facing.

  • Consolidation: many of Teva’s customers are consolidating, which is lowering the revenue the company plans to earn in the future.
  • Competition: there is more competition for generic drugs. This is leading to cost cutting and lowering potential revenue.
  • The decline in specialty drugs: many of Teva’s specialty drugs have experienced a year over year sales decline and there is no sign of sales picking up any time soon.
  • Slower to market: a handful of the drugs in the pipeline are being delayed which is putting added pressure on the company and Teva stock price.
  • Increase in debt: the debt burden of Teva has now eclipsed $35 billion, which puts pressure on earnings
  • Search for CEO: the company is still searching for a permanent CEO, so the company is in a sense meandering along until a new leader takes over.
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Disclosure: This author has no positions in any stock mentioned and does not plan to open any positions in any stocks mentioned for at least 72 hours after publication of this ...

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Kate Hayden 3 years ago Contributor's comment

Yes, the ongoing lack of CEO is a problem, and yes, the loss of market cap is significant, but this article seems to be a bit outdated, the stock has been climbing back since the weekend. It was up 5% today. I think 'destroyed' is quite an overstatement.

Kate Hayden 3 years ago Contributor's comment

(oops I hit send too soon). The stock is still much not more than half where it was two weeks ago - but I'm curious as to who is buying back in.