EpiPen Maker Stung by Earnings Miss, Bear Notes

Mylan's weak earnings and guidance has prompted at least five bear notes

by Patrick Martin

Published on Feb 27, 2019 at 9:30 AM

The shares of Mylan NV (NASDAQ:MYL) are down 10% in electronic trading, after the EpiPen producer reported adjusted fourth-quarter profit of $1.30, falling short of analysts' $1.36 per share estimate. The drugmaker's 2019 profit forecast also was beneath expectations, prompting five price-target cuts, including one to $36 from $41 at Raymond James.  

Should today's pre-market price action pan out, this would be Mylan stock's worst single-session drop since Feb. 11, 2016, when it dropped 18.1%. Prior to today, MYL had added 11.8% year-to-date, but had rallied back up to its 120-day moving average, a trendline with historically bearish implications.

Today's shift in analyst sentiment could be just the beginning. Of the 14 brokerages covering MYL, nine rate it a "buy" or better, with zero "sells" on the books. Plus, its consensus 12-month price target of $37.64 is a 23% premium to last night's close at $30.62.

There's also ample room for short sellers to climb on board. Short interest actually fell by 24% in the last two reporting periods to 6.12 million shares, a meager 1.2% of the security's total available float. MYL's inability to take advantage of this exodus of bearish bets only underscores its technical weakness.

In the options pits, data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows the security with a 10-day put/call volume ratio of 0.73, which ranks in the 79th percentile of its annual range. While this indicates that bought calls have outnumbered puts on an absolute basis, the elevated percentile ranking tells us option buyers have purchased MYL puts over calls at a faster-than-usual pace in the past two weeks.

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