Meeting With Mylan Management Shows This Is The Stock's Biggest Problem

• Mylan NV MYL shares have lost 27 percent since February 8.
• RBC Capital Markets’ Randall Stanicky maintained a Sector Perform rating for the company, with a price target of $58.
• Although Mylan’s stock is inexpensive, there are few catalysts to drive upside, Stanicky stated.

Mylan had been pursuing a deal with Media Analytics Corp MEDA for quite some time. The deal adds OTC, which is “an area of high interest,” analyst Randall Stanicky said.

He added, however, that the 92 percent premium, along with the “unexpected nature” of the deal created “sticker shock,” especially since it came so quickly after the takeover of Perrigo Company plc Ordinary Shares PRGO.

Although the deal with Media Analytics has some strategic merit, “the challenge is more about finding the right balance of (i) strategic expansion (ii) ROI/EPS accretion and importantly (iii) improvement to overall growth,” Stanicky wrote. He added that Mylan should rather add higher growth assets to the platform.

Mylan reported its 4Q results short of expectations. The adj. diluted EPS estimates for 2016 and 2017 have been reduced from $4.87 to $4.86 and from $5.32 to $5.31, respectively.

Although the stock is currently inexpensive, it is unclear what would reverse the recent weakness in the absence of any significant catalysts, the analyst commented, while adding, “In other words, we do not see a need to rush into the stock but for those with longer time horizons MYL sets up as a value play with improving 2017 outlook.”