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Valeant Pharmaceuticals Intl Inc (VRX) Investor Call Fails to Stop the Bleeding

Valeant Pharmaceuticals Intl Inc (VRX) continues to plummet, even though the company's CEO denied Citron Research's allegations

Oct 26, 2015 at 10:32 AM
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Valeant Pharmaceuticals Intl Inc (NYSE:VRX) has been making waves in the news and on the charts, mostly related to Citron Research's brutal report on the company's business practices. Despite solid gains on Friday, the stock closed out last week on a roughly 52% loss, and is extending that decline today, down 1.8% at $114.06.

Sparking this morning's volatility is a response to Citron's allegations of "channel stuffing" from VRX CEO Mike Pearson, who called the charges "completely untrue" during a conference call with investors, and said he has asked the Securities and Exchange Commission (SEC) to investigate the short selling firm for potential market manipulation. However, he added that the company will establish a committee to investigate the claims in the interest of "transparency."

Amid the downtrend, it seems option traders have been betting on a bounce. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), VRX's 10-day call/put volume ratio has increased to 1.03 from 0.83 over the past five sessions. In today's trading, calls are crossing at twice the expected intraday rate, with the weekly 10/30 120 strike in the lead.

Analysts are also tilted bullishly toward VRX. In fact, two-thirds of covering analysts rate the stock a "buy" or better, with not a single "sell" opinion on the books. What's more, the equity's consensus 12-month price target of $311.92 sits in record-high territory -- and nearly triples current levels.

From a contrarian perspective, Valeant Pharmaceuticals Intl Inc (NYSE:VRX) could be in trouble. Should the shares continue to crumble, a capitulation among bullish holdouts could exacerbate losses.
 

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