Valeant Pharmaceuticals Intl Inc's (VRX) Bad Week Just Got Worse

Valeant Pharmaceuticals Intl Inc (VRX) still has plenty of fans, despite fundamental and technical woes

by Andrea Kramer

Published on Mar 3, 2016 at 11:10 AM

It's been a rough few days for Valeant Pharmaceuticals Intl Inc (NYSE:VRX). The stock has shed almost 18% this week, after the company delayed its earnings release, confessed to a subpoena from the Securities and Exchange Commission (SEC), and was slapped with a subsequent round of bearish analyst attention. It's more of the same today, with Valeant shares down 1.6% at $66.42, as traders react to a notable executive departure. However, there could be more room for VRX to fall, should bullish holdouts abandon ship.

The stock's Schaeffer's put/call open interest ratio (SOIR) of 0.96 is higher than just 9% of all other readings from the past year. In other words, near-term option traders have rarely been so call-heavy. In fact, VRX call open interest just hit an annual high, with more than 384,000 contracts in residence. 

Near-term traders have been paying up for VRX options, too. The stock's Schaeffer's Volatility Index (SVI) of 94% sits in the 66th percentile of its annual range, pointing to relatively inflated volatility expectations.

Meanwhile, nine out of 17 analysts maintain a "strong buy" opinion of VRX. Likewise, the average 12-month price target of $142.25 is more than double the stock's current price. Another wave of downgrades and/or price-target cuts could exacerbate selling pressure on VRX.

Over the past year, Valeant Pharmaceuticals Intl Inc (NYSE:VRX) has shed more than two-thirds of its value, and on Tuesday touched a two-year low of $59.87. The company has been embroiled in scandal since a damning Citron Research report in September, so it's not surprising that some traders are skeptical that Deb Jorn, executive vice president and group chairman, departed for "personal reasons." 

 

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