Teva again king of Tel Aviv castle

Teva CEO Richard Francis  credit: Teva spokesperson
Teva CEO Richard Francis credit: Teva spokesperson

After a 130% rise in its share price in the last year, the pharmaceuticals company has left the big two banks and Nice a long way behind.

The share price of Teva Pharmaceutical Industries (TASE: TEVA; NYSE: TEVA) has risen by 130% in the past year. The company has thereby once more become the largest in market cap terms on the Tel Aviv Stock Exchange, overtaking technology company Nice (TASE: NICE; Nasdaq: NICE) and the big two banks, Leumi (TASE: LUMI) and Hapoalim (TASE: POLI).

Teva currently has a market cap of NIS 72 billion, leading the next largest company, Bank Leumi, by a gap of more than NIS 25 billion (54%). In fact, Teva has the second best return of the stocks on the Tel Aviv 35 Index list, outdone only by semiconductor inspection equipment company Camtek (TASE: CAMT; Nasdaq: CAMT), which has risen by 268%, borne aloft by the euphoria over AI chips.

Teva is the second largest among Israeli companies traded in New York, after autotech company Mobileye (Nasdaq: MBLY). In dollar terms, Teva has a market cap of $19.6 billion, and Mobileye $22.7 billion. Third largest is Check Point (Nasdaq: CHKP), with a market cap of $17.7 billion, followed by (Nasdaq: MNDY) and Nice, both on $11.1 billion.

Why Teva has taken off

The rise in Teva’s share price is largely due to the company’s own efforts. It underwent far-reaching changes under its previous CEO, Kare Schultz: it cut costs, introduced efficiency measures, closed plants, laid of more than 15,000 employees, and signed a settlement of the claims against it in the opioids affair. Now, under its current CEO Richard Francis, Teva is talking about growth, new products, and streamlining its portfolio. In addition, in the past year it has received approvals from the US Food and Drug Administration (FDA) for generic versions of several drugs. In 2023, for the first time in five years, Teva recorded growth in revenue, and for several successive quarters it has beaten analysts’ estimates.

In the first quarter of 2024, Teva confirmed its guidance of revenue of $15.7-16.3 billion for the year, an operating profit on a non-GAAP basis of $4-4.5 billion, and non-GAAP earnings per share of $2.2-2.5. The scar that Teva still bears from its crisis years, when it lost the status of "the people’s share", is its debt. After cutting it by half, Teva is still coping with debt of some $18 billion, and the company remains a long way from its peak market cap of NIS 260 billion.

The ones who failed to foresee the climb in Teva’s share price were actually the experts, the analysts. At the beginning of this year, 17 of the 26 analysts covering the company recommended "Hold" for the stock, with am average price target of $11.3. Teva is currently traded at $17.2. At present, the analysts see little upside, and, according to data from Yahoo! Finance, 17 out of 26 still recommend "Hold", with an average price target of $18.5. More bullish are Jefferies, Barclays, and UBS, which recommend "Buy", while JP Morgan is "Neutral".

Sabina Levy, head of research at Leader Capital Markets, says, "Although it’s still too early to draw sweeping conclusions about all the products, there’s no doubt that Teva’s varied product portfolio, which includes seven potential products expected to reach the market by 2027, will enable the company to benefit from the positive change in the dynamics of the market."

Benefitting from others’ weakness

While Teva’s rise is attributable to the company itself, the gap it has opened up at the top of the Tel Aviv Stock Exchange ladder is also an indicator of the weakness of the local market. Of the five companies that come after it, none has managed a three-digit return such as Teva has, or even anything close.

In second and third places are the major banks, Leumi and Hapoalim, which have risen by 18% and 13% respectively in the past year, which is not bad for such a conservative sector. But in the shorter term, since the beginning of the year, they have risen by only 6.6% and 3.4%, mainly because of the early months, when the Bank of Israel cut its interest rate by 0.25%, and further cuts were thought to be on the way, which would have hit the banks’ profits.

But Teva has chiefly benefitted from the weakness of Nice. A month ago, Nice CEO Barak Eilam made the surprise announcement that he would be stepping down after leading the company for over a decade. The company’s share price immediately reacted with a sharp fall, which worsened at the beginning of this month when Microsoft announced that it was developing a product that would compete with one of Nice’s main activities, the use of artificial intelligence in customer relations management. In the space of just a month, Nice’s share price fell by about 25%, almost completely wiping out the rally of the first few months. Over the past twelve months, Nice’s share price is down 23%, bringing its market cap to NIS 39 billion.

Published by Globes, Israel business news - - on June 17, 2024.

© Copyright of Globes Publisher Itonut (1983) Ltd., 2024.

Teva CEO Richard Francis  credit: Teva spokesperson
Teva CEO Richard Francis credit: Teva spokesperson
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