Does Ackman's exit finally signal a bottom for Valeant?

Posted March 15, 2017

Pershing Square Capital Management has bailed on Valeant Pharmaceuticals International by selling its final stake in the drugmaker for a large tax loss.

Ackman's exit sent shares down almost 10 percent in after-hours trading. A rating of 4 or 5 would represent a Sell recommendation. While the actual EPS the company reported in the same quarter previous year was 1.27/share. Volume was about 50% above the daily average of around 27 million shares. The firm earned $2.40 billion during the quarter, compared to analyst estimates of $2.34 billion. CIBC Asset Management Inc now owns 489,967 shares of the specialty pharmaceutical company's stock valued at $12,024,000 after buying an additional 179,569 shares during the last quarter. The fund's current holdings include burrito chain Chipotle Mexican Grill Inc., food group Mondelez International Inc., and industrial gas supplier Air Products & Chemicals Inc. (See "We are on the brink of a catastrophe": nine highlights from Bill Ackman's Valeant emails.) The markets will reward strong earnings growth and organic business growth over time.

But those investors are ignoring an important point: Valeant shares are incredibly cheap on a price-to-cash flow basis.

The shares, already down more than 90 percent since their August 2015 peak, fell 10 percent to $10.89.

The analysts at BMO have cut their price target on VRX from $19 to $15.

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It hasn't been a good couple of years for billionaire investor Bill Ackman. According to them, the median (average) EPS the company could deliver is 0.91/share.

Canadian department store Hudson's Bay Company (HBC.TO) is in talks to buy Neiman Marcus, CNBC reports, citing Dow Jones. The stock has returned -82.4% over the past year. Mizuho lowered Valeant Pharmaceuticals Intl from a "neutral" rating to an "underperform" rating and decreased their price objective for the company from $25.00 to $11.00 in a research report on Wednesday, November 23rd. The retailer expects losses of $0.07 to $0.15 per share for the quarter, and that disappointed investors who had hoped that Tilly's would be able to generate more positive momentum coming out of the holiday shopping season.

Based in Canada, Valeant is a pharmaceutical and medical device company, having a market cap of over $4 billion. If shares are trading on top of the moving average, the moving average may provide a level of support.

In the end, you all know that I think Herbalife's settlement with the FTC and the new unproven business model it's had to implement since then is likely to cause big problems with the company's earnings expectations for the next couple years.