JPMorgan updates estimates for Valeant Pharmaceuticals Intl Inc (NYSE:VRX)

Valeant Pharmaceuticals Intl Inc (NYSE:VRX)’s Overweight rating and price target of $225 has been reiterated at JPMorgan despite all the controversies surrounding the stock. The firm has also updated its EPS targets for the company, largely believing that Valeant is inexpensive at the current levels and the headline sell-offs are overdone.

 

Estimates update

JPMorgan expects Valeant Pharmaceuticals Intl Inc (NYSE:VRX) to post EPS of $3.41 in the current quarter (4Q). For 2016, the firm is looking for EPS $14.41, which it predicts will rise to $17.01 in 2017.

 

Among other things, JPMorgan still has faith in Valeant’s dermatology business and ongoing research to expand its product portfolio. As such as there exists controversy in the company’s specialty distribution channel, largely courtesy of Philidor, JPMorgan doesn’t expect the stain to stay forever. Instead, the firm predicts the Philidor-related shock on the stock of Valeant will fade soon or later as investors shift their attention from the headlines to the company’s fundamentals.

 

JPMorgan cites in its updated note on Valeant that concerned partners have called in to question if its apparently bullish valuation of the stock is justified in the wave of the Philidor controversy and pressures in the company’s dermatology unit.

 

To skeptics, JPMorgan says in a few words that Valeant is a stronger business than many investors already know. For example, the firm says that the Philidor scandal could weigh down Valeant in 4Q and may be 1H2016m, but thereafter, the company’s strong fundamentals will justify its valuation.

 

As to whether the Philidor issue could attract fines for Valeant, JPMorgan believes that if fines do come, they will be more than manageable for the company.

 

Volume-driven growth

On the issue of Valeant Pharmaceuticals Intl Inc (NYSE:VRX)’s growth being funded by price increases, JPMorgan doesn’t buy the whole story. According to the firm, Valeant’s growth in the recent times is increasingly shifting to volumes rather than price. That explains why limits in price increase are unlikely to limit the company’s topline growth.

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