Pfizer shares were down 6% to $38.96 in heavier-than-average trading Tuesday morning.
Morgan Stanley downgraded Pfizer to Equal-weight from Overweight and lowered its price target to $40 from $48.
Mylan N.V. (MYL) and Pfizer said Monday they agreed to combine Mylan with Upjohn, Pfizer’s off-patent branded and generic established medicines business.
Pfizer’s planned exit of Upjohn exposes lower-than-expected earnings for both the remaining company and the off-patent business, Morgan Stanley said. “Although we view the Upjohn exit…as a strategically sound deal, new 2020 management disclosures revealed earnings power that is much weaker than we realized,” the Morgan Stanley note said.
Bank of America Merrill Lynch downgraded Pfizer to Neutral from Buy and lowered its price objective to $41 from $49.
Bank of America said it is downgrading Pfizer based on its updated sum-of-the-parts valuation, including expected dilution from the Upjohn deal and the valuation outlook for the remaining company.
“We ultimately believe PFE’s decision to spin-off its Upjohn unit makes strategic sense given the unit was likely to be meaningful drag on growth and allows the company to focus on its innovative pharma unit,” the Bank of America note said.
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