Morgan Stanley Lifts Target On Valeant From $235 To $284

In a report published Monday, Morgan Stanley analyst David Risinger maintained an Overweight rating on Valeant Pharmaceuticals Intl. Inc. VRX, while raising the price target from $235 to $284. The analyst believes that while the company is expected to continue to see organic growth momentum going forward, there could be additional upside from M&A. Investors also appear to underappreciate the new CFO.

According to the Morgan Stanley report, "Valeant has strong organic growth prospects, driven by its attractive portfolio of durable franchises and decentralized business model, and management intends to pursue additional M&A to drive further stock upside."

The analyst expects double-digit revenue growth for Valeant over the next few years, driven by its Jublia and Xifaxan products, each of which are likely to have peak sales of $1 billion.

Risinger also believes that the new CFO, Robert Rosiello, "has the experience and mindset to help Valeant create additional value through future M&A."

In addition, the company has filed NDAs for Relistor Oral and Vesneo, which the analyst expects to start contributing significantly to Valeant's results by 2H16. Moreover, only a small percentage of products face patent expiration in the next few years.

Valeant's management posted strong Q2 results, while raising the guidance for the year. The EPS estimates have accordingly been raised, with the 2015 estimate being raised from $11.20 to $11.73, 2016 from $15.70 to $16.46, and 2017 from $18.05 to $18.96.