TEVA Stock Tumbles After $85 Million Opioid Settlement

The stock hit a 19-year low earlier

Deputy Editor
May 28, 2019 at 10:00 AM
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Drugmaker Teva Pharmaceutical Industries Inc. (NASDAQ:TEVA) settled a lawsuit filed by the state of Oklahoma, accusing TEVA -- and other pharmaceutical firms -- of fueling the opioid epidemic through marketing of its generic painkillers. Teva agreed to pay an $85 million settlement. The stock is down 1.8% at $10.68, in response, fresh off a new 19-year low of $10.71. 

UBS reacted to the news by downgrading TEVA to "neutral" from "buy," and slicing its target price to $12 from $22. UBS' outlook is nothing new among the brokerage bunch, with a whopping 15 out of 19 analysts calling TEVA a "hold" or worse. The consensus 12-month target price, however, is all the way up at $17.86.

On the charts, TEVA has been trading in a channel of lower highs and lows, recently pressured by its descending 10-day moving average. The stock suffered a bear gap earlier this month after the company was named in a price-fixing lawsuit, and just hit a new one-year low of $10.82 last Friday. Now, the stock is eyeing its fourth day in the red, and its lowest close since 2000.

Short sellers have been cashing out amid this negative price action. Short interest has fallen nearly 15% in the last two reporting periods, now representing just 1.8% of the stock's available float.

Options traders, on the other hand, have been ramping up their bearish exposure to the drug stock. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), TEVA's 10-day put/call volume ratio of 1.11 ranks in the 77th annual percentile, meaning puts have been bought to open over calls at a quicker-than-usual clip.

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