Will Teva stock recover from the recent bloodbath? It is the big question institutions and retail investors are asking. On one end, investors believe the lawsuit and stagnating financials will cripple Teva. Conversely, the bullish hedge funds argue that Teva holds value in the long-term. Thus, today’s article will breakdown the recent sell-off, which institutions are bullish, and the likelihood of a recovery.
Table of contents 1. Why is the Teva stock down? 2. Can Institutional buying clarify the sentiment? 3. Will the Teva stock recover?
Is the Teva rebound over?
Teva’s recent decline comes after the company faces legal scrutiny for price-fixing and violating an anti-kickback law. If the federal prosecutors find Teva guilty, than the consequences would be dire for the company and investors. Because Teva would be excluded from federal healthcare programs in the U.S., further jeopardising the Israeli company’s business and its long-term sales and growth. It seems the possible legal risk might be unpalatable for some investors, hence the sell-off.
Moreover, Teva’s inability to produce substantial profit margins might be causing investors to call it quits. For the past three quarters Teva has not been able to post earnings above 4%. Profit stagnation for three-quarters could suggest the business is fundamentally stuck for the moment. Consequently, short-term investors are likely selling.
Institutions are doubling down – is this a signal of a Teva rebound?
While more retail investors are flooding the market, institutional investors still own the underlying sentiment of Teva. Therefore, looking at which hedge funds are long and short on Teva and why is crucial.
Before the pandemic, hedge funds were leaning towards the bullish side of Teva. The virus understandably scared institutions away. However, in the past few months, the institutional bulls reclaimed victory. Especially as Teva Pharmaceutical Industries was in 31 hedge funds at the end of June. The most notable hedge funds leading the pack include Berkshire Hathaway and Abrams Capital Management.
It is essential to understand that when institutions go long on a stock, they are not looking for an overnight fix. Instead, they are looking to follow the value of the company until it reaches its milestones. In Teva’s case, the recent injection of bullish hedge funds is a point to the bullish argument.
Will the Teva Stock recover?
Before I begin, I remind our viewers that this is not advice. Instead ,this is investment commentary from extensive research
To understand whether Teva will recover, investors should ask, is there even a dip to invest in, in the first place? Initially, the lawsuit, disappointing financials, and the recent sell-off may suggest there is no dip to invest in. For the imminent future, hedge funds would likely agree with the bearish stance.
However, if Teva is at capitulation and management’s recovery strategy is successful, then the institutions going long will be right. (opinion not advice) Teva is currently culling unprofitable product lines while also rolling out new offerings to the market. All with the intention to restructure the company for financial success. Furthermore, Teva could pay out the legal settlement, if found guilty, over multiple years. In which case, Teva would reach the light at the end of the tunnel.
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The information above is not financial advice. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.
Written by Patrick McLoughlin, Senior Manager of YIG.