Teva: Value Trap

Investment Thesis

I was previously bullish Teva (TEVA) while not being a shareholder. Now, I'm totally bearish but ended up being a shareholder. Which is ironic. Teva's Q3 2017 results were so much worse than I had been expecting. Well, not so much their results, but its guidance and management's total inability to understand and forecast their business.

In my previous article, a few weeks back, I wrote,

Teva could generate recurring cash flow in 2017 of $4 billion, down from the original $4.4-4.6 billion in its August forecast. Then, for 2018, its cash flow could have a run rate of $3 billion - a realistic estimate once competition for Copaxone has had time to properly ramp up their own sales.

Yesterday's results show that this forecast of mine was just too optimistic. No matter how conservative I tried to be at $4 billion in cash for the full year 2017, in hindsight, it was nothing short of fallacious. The company's outcome is, now just too speculative.

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