BMO Valeant Reaction: 10-K Could Give Investors Confidence To Value Shares Above $60

Courtesy of Benzinga.

Valeant Pharmaceuticals Intl Inc (NYSE: VRX) shares are selling off on Monday afternoon, following a higher morning amid news that the company will move on from its current CEO. The stock is still up 6 percent on the day. While Wall Street’s reaction is mixed, one analyst is giving his thoughts on what Valeant’s next catalyst could be.

‘The most important upcoming event for VRX is the filing of its 10-K, which the company expects by April 29, 2016,” BMO’s Alex Arfaei wrote. “If Valeant is able to do this, it will cure the technical default in its covenants. At that point, investors should have a better handle on the underlying fundamentals of this business.”

In Arfaei’s opinion, Valeant is undervalued based on its actual fundamentals, but investors don’t care about that at the moment because of high levels of uncertainty. “To get back to fundamentals, in our view Valeant needs to rebuild credibility first,” he added. That starts with replacing CEO Mike Pearson and asking former CFO Howard Schiller to resign from the Board — two updates the company announced on Monday.

“Investor confidence should then follow with execution,” the analyst predicted.

Valeant’s target price at BMO is $66 per share, a 145 percent return potential as of Arfaei’s writing. The stock presently trades near $29 per share.

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