Barron's: Allergan And Pfizer Still Buys Even After Deal Fell Through

In the past two trading sessions, shares of Allergan plc Ordinary Shares AGN and Pfizer Inc. PFE are headed in opposite directions. The market clearly sees the decision to call off the Pfizer/Allergan merger as good news for Pfizer and bad news for Allergan. However, Barrons’ Johanna Bennett believes both stocks are now excellent buys.

“Both have potential blockbusters on the horizon yet Wall Street appears to be undervaluing their pipelines,” Bennett explains. She adds that Allergan and Pfizer currently trade at multiples of only 13.3 and 12.3, respectively, both deeply discounted from a historical perspective.

Related Link: Is Allergan Worth Over $300 Without Pfizer?

For Allergan, the sale of its generic drug business to Teva Pharmaceutical Industries Ltd (ADR) TEVA will go a long way in solidifying the company’s debt-burdened balance sheet. The $40 billion pricetag on the generics business could virtually eliminate Allergan’s $42 billion in debt as of Dec. 31, or the company could decide to use a portion of the proceeds for share buybacks instead.

Pfizer, on the other hand, already yields 3.8 percent and could now move forward with its breakup plan. In addition, the company could choose to pursue other smaller acquisitions as well.

Regardless, Bennett now believes that both stocks are solid buys and that both Pfizer and Allergan have bright futures ahead.

Disclosure: the author holds no position in the stocks mentioned.