Valeant Shares Rise as Once-Burned Analysts Regain Optimism

Stock analysts are starting to come back around to Valeant Pharmaceuticals International Inc. after being burned by the company over the past year.

The shares rose 13 percent to $30 at 4 p.m. Wednesday in New York, their highest closing price since May, after two analysts raised their ratings and issued new price targets this week. Morgan Stanley’s David Risinger raised his rating to “overweight” from “equal weight” Wednesday, while Mizuho Securities USA’s Irina Koffler changed her rating to “neutral” from “underperform” on Monday.

Chief Executive Officer Joseph Papa’s plan to divest assets and amend agreements with lenders should improve the company’s financial health and diminish the risk of default, the analysts said. Risinger raised his price target to $42 from $33, and Koffler raised her target to $25 from $11.

“Although Valeant still faces risks, we see the upside skew as attractive,” Risinger said in his note Wednesday. “Risk of severe financial stress should diminish as covenants are renegotiated and Valeant pays down debt.”

Analysts who cover the stock were slow to downgrade the shares as they fell more than 90 percent from their $262.52 peak in August of last year. Valeant appears to be rebounding slightly after plunging over the last year as the drugmaker faced investigations of its drug pricing and business practices. This month, Valeant reaffirmed its full-year forecasts and confirmed the U.S. Justice Department is investigating its ties to a now-defunct pharmacy, Philidor Rx Services LLC.

For a Bloomberg Intelligence Primer on Valeant, click here.

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