Where Are Teva Shares Headed After the Q4 Decline?

Analysts Are Bullish, but Technicals Remain Bearish

Teva Pharmaceutical Industries Limited (TEVA) shares fell about 8% on Wednesday after the company reported its fourth quarter financial results. Revenue fell 15.6% to $4.56 billion, beating consensus estimates by $30 million, but non-GAAP earnings per share came in at just 53 cents, missing consensus estimates by two cents per share. Guidance for FY2019 was also weaker than expected, with revenue of $17.0 billion to $17.4 billion and non-GAAP earnings per share of $2.20 to $2.50.

Analysts reacted to the earnings late Wednesday and early Thursday. Wells Fago maintained its Market Perform rating on Teva shares but said that the shortfall was worse than expected. Credit Suisse lowered its price target from $26.00 to $20.00 but said that Wednesday's sell-off may have been overdone. Meanwhile, Raymond James upgraded the stock from Market Perform to Outperform following Wednesday's significant decline. The overall consensus is that the earnings reaction was overdone.

Chart showing the share price performance of Teva Pharmaceutical Industries Limited (TEVA)

From a technical standpoint, the stock's 2019 rally started to ebb in early February. The stock briefly rebounded from Fibonacci support before breaking down during Wednesday's session. The relative strength index (RSI) moderated to about 40.00, but the moving average convergence divergence (MACD) experienced a bearish crossover. These indicators suggest that there could be more downside ahead for the stock or at least a period of consolidation before a potential move higher.

Traders should watch for a breakout from Fibonacci, pivot point and 50-day moving average resistance at around $18.30 to signal a possible intermediate-term move higher. A breakout from these levels could lead to a move higher to retest reaction highs of $20.30, but a failure to break out from these levels could lead to a further move lower toward S1 support at $16.68 or prior lows at around $14.50.

The author holds no position in the stock(s) mentioned except through passively managed index funds.

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