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Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA) is facing a number of fundamental headwinds as it approaches its quarterly earnings announcement on Feb. 8, before market open, and we anticipate that the stock is going to give back some of the gains it has enjoyed during its 100% price increase since its last earnings announcement in early November.
The largest headwinds may potentially come from the Federal and local governments and some hospital groups. The U.S. Justice Department is currently looking into suing generic drugmakers for alleged price fixing, various state and local governments are looking at suing large pharmaceutical companies over damages stemming from the opioid epidemic, and large hospital groups are banding together to provide their own generic drugs in an effort to curb soaring costs.
Any one of these efforts could be detrimental to TEVA’s share price, but the possibility of all of them together is quite concerning. Add on to that the failed late-stage asthma study TEVA recently reported on and the additional $5 billion in debt the company is looking to raise, and you’ve created an environment where traders may be eager to take short-term profits off the table.
We expect TEVA to drop below support at $20, with the potential of dropping down to the stock’s next major support level at $17.
‘Buy to open’ the TEVA March 20 Put (TEVA180316P00020000) for a maximum price of $1.30.
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