Valeant Isn't Out Of The Woods Yet

Investors initially celebrated a mixed Q2 earnings report from Valeant Pharmaceuticals Intl Inc VRX to the tune of a 7 percent Tuesday-morning pop for the stock. However, that enthusiasm quickly evaporated as the reality of yet another guidance cut and an uncertain future started to sink in.

After finishing Tuesday’s session up just 1.7 percent, Valeant’s slide spilled over into a 10.6 percent sell-off on Wednesday.

According to a pair of Wall Street analysts, Valeant investors are right to be skeptical, and the company has a long way to go before it has put its troubles in the rear-view mirror.

Turnaround Not Here Yet

According to Rodman & Renshaw analyst Raghuram Selvaraju, traders don’t have to look any further than the latest guidance cut to see Valeant isn’t in recovery mode quite yet.

“While we remain confident in Valeant's ability to manage its debt position and continue to stabilize the business, we nevertheless believe that—especially in light of the revenue guidance cut—the evidence of a turnaround is still not sufficient for us to turn bullish on the stock,” Selvaraju wrote on Wednesday.

Related Link: What A Difference 24 Hours Makes For Valeant

Expect More Guidance Cuts

Canaccord Genuity analyst Neil Maruka echoed Selvaraju’s sentiment. Maruka said Valeant investors should expect more guidance cuts over the next four quarters.

“The delayed genericization of several products including Mephyton, Syprine, and Isuprel have partially offset the negative impact of divestitures; however, this generic competition is nonetheless expected before the end of the year and we believe is likely to result in the erosion of ~$300 million in annualized revenue in 2018,” Maruka wrote.

For now, both Canaccord and Rodman & Renshaw are staying on the sidelines when it comes to Valeant. Canaccord has a Hold rating and $16 price target, while Rodman & Renshaw has a Neutral rating and $17 price target.