Allergan (NYSE:AGN) has been a painful ride for investors. Starting last year when the proposed merger with Pfizer (NYSE:PFE) fell through, Allergan has fallen. As of this writing, shares are trading at $186 and nearing their 52-week low.
But the interesting thing about Allergan is that it has a lot going for it and most analysts agree. In this post, I will show you all of the great things going on with this company and what might be some of the things holding the stock back.
Things Going Right For Allergan
Looking first at earnings, the company reported earnings per share of $4.02 which beast estimates by $0.10. Revenues came in at $4 billion, also beating estimates, this time by $70 million. This was an increase of 9%.
And this growth isn’t expected to slow. Analysts expect earnings growth of 13% over the next 5 years.
What is fueling this growth? First are the drugs Botox and Juvederm. Both are seeing increases in sales and these 2 treatments only account for around 10% market share in their respective segments. In other words, there is a lot of room for future growth.
In addition to these, Allergan has 6 drugs in its pipeline that are getting rave reviews and if they pass through clinical trials, are expected to be revenue machines.
Here are the 6 drugs:
- Ubrogepant: treatment for migraines
- Atogepant: treatment for migraines
- Rapastinel: treatment for depression
- ESMYA: treatment for uterine fibroids
- Relamorelin: treatment for diabetic gastroparesis
- Ceniciviroc: treatment for HIV infection
- Abicipar: treatment for macular degeneration
Next up is international sales growth. During its recent earnings report, international sales are up over 16%, with China leading the way with growth of 61%. Most analysts agree that this speed of international growth should continue.
Finally, Allergan has decided to institute a share buyback program of $2 billion and has raised revenue guidance for the remainder of 2017. Add to this some analysts have a price target of $275 per share, which leaves a lot of room for price appreciation.
The Case Against Allergan
With such a great outlook, what are some things that could potentially be holding the stock price back? There are a few things, and here they are in no particular order.
Debt: the company has over $30 billion of debt on the books. I’m not sure why this would be a major factor now as most investors ignored it when merger talks were happening with Pfizer. But since that deal fell through, the focus has been on the large amount of debt. Maybe is it because Allergan seems to have no interest in paying it off quickly?
Slowing sales: some of the drugs the company has on the market are seeing declines in sales. These are outweighed by the great performance of other drugs it is selling. And since drugs in the pipeline are not a guaranteed revenue stream until they actually come to market, investors can’t assume the declining sales will be further hidden by newer, hot selling drugs.
So Should You Invest In Allergan?
Personally, I don’t understand why investors are beating this stock down so much. The company has a great outlook and the negatives that are potentially weighing it down are not the biggest of concerns. At these levels, I would be investing in this stock.
If analysts are right and the stock hits its target of $275, you are making a ton of money. And even if it doesn’t hit that target, there is still tremendous upside potential for this stock.
This author has no positions in any stock mentioned and does not plan to open any positions in any stocks mentioned for at least 72 hours after publication of this article.