Goldman Sachs: Now Is The Time To Get In On Teva's Turnaround

Teva Pharmaceutical Industries Ltd (ADR) TEVA announced Thursday a plan to eliminate more than 25 percent of its worldwide workforce as part of a strategy to slash $3 billion of annual costs.

The Analyst

Goldman Sachs' Jami Rubin upgraded Teva's stock from Neutral to Buy with a price target boosted from $15 to $20.

The Thesis

Teva's cost-cutting plan marks a turning corner event for the Israel-based company, Rubin said in a note. The company is now in the early stages of a "credible turnaround," which is being led by new CEO Kåre Schultz, who has a history of under-promising and over-delivering.

While there will still be investor skepticism, the company's game-plan also marks the first time it has delivered a "concrete strategy" towards deleveraging the company, the analyst said. Specifically, a 4 times  net leverage target for 2020 would likely be accompanied with EBITDA growth from $5.7 billion in 2018 to $6.5 billion in 2019, which would bring the company to its net leverage target.

Teva's stock will also benefit from the Street moving their numbers higher which marks a reversal of a bearish shift since the company's August 2016 acquisition of Actavis Generics.

Price Action

Shares of Teva gained 6 percent to trade around $18.32 Friday morning.

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