Teva Remains Mired In A Downtrend
The share price of Teva Pharmaceutical (TEVA) remains mired in a downtrend that began in 2015. A dividend cut announced to devote cash for debt repayment caused the stock to suffer a steep plunge in August last year. I argued then that its competitor, Mylan (MYL), was still the better pick even despite the bloodletting at Teva. While the share price has recovered from the lows reached in the fourth-quarter of 2017, it seems unable to break out of the two-year resistance level (see the green line in the price chart below).
In an article titled Teva: Caution Is Warranted, I wrote that Mr. Schultz, the incoming CEO, "could face strong opposition to job cuts which would hamper his efforts to seek cost-savings". More than six months later, the warning rings true. Just a couple of days ago, Israeli labor federation Histadrut stated its intention to take labor or legal action against Teva if it did not suspend a decision to close a plant in the Israeli port city of Ashdod. This was clearly a timely reminder that investors need to temper their excitement over what the exalted Mr. Schultz, who has a 30-year pharmaceutical and healthcare experience, could do to reverse the stock decline.
