We came across a bullish thesis on Teva Pharmaceutical Industries Limited (TEVA) on Substack by Kontra. In this article, we will summarize the bulls’ thesis on TEVA. Teva Pharmaceutical Industries Limited (TEVA)’s share was trading at $13.94 as of April 7th. TEVA’s trailing and forward P/E were 872 and 5.37 respectively according to Yahoo Finance.
A close-up shot of various types of medicines on a table, illustrating the specialty and generic products offered by the pharmaceutical company.
After years of underperformance and litigation overhang, Teva appears to be entering a new era of structural improvement and operational discipline. Despite its fundamental progress, the market continues to price the stock as if it’s in terminal decline—trading at just 5.8x 2025 EPS and 4.4x 2029 EPS. This disconnect presents a compelling opportunity for investors. The company is proactively addressing its most significant near-term challenge: the expected loss of exclusivity for Revlimid in 2026, which could reduce revenue by $1 billion and EBITDA by $750 million by 2027. To counter this, Teva plans to unveil a $750 million cost optimization program during its Q1 2025 earnings call, which could lift EBIT margins by over four percentage points to 30% by 2027. The gross margin, currently stabilizing at 54–55%, is supported by a favorable product mix shift toward high-margin branded drugs like Austedo, which has a gross margin of 96%. Meanwhile, Teva’s CNS-focused branded portfolio, including Austedo, Ajovy, and Uzedy, is showing robust growth and upside potential, particularly with Austedo expected to generate $2.5 billion by 2027. Additional top-line stability comes from a favorable FX environment in international markets.
Financially, Teva reported $16.5 billion in revenue for 2024 and is projected to grow this to $17.3 billion in 2025, with EBITDA of $5.2 billion and margins at 30%. Looking out to 2029, EBIT margins are expected to climb to 31.4%, with net earnings rising from $3 billion to $4.2 billion, implying a CAGR of 8.7%. Free cash flow yield is forecast to rise sharply—from 3.3% in 2025 to 16.7% by 2029—while net debt is set to fall below 2.0x EBITDA by 2027. The valuation remains undemanding, and none of this margin or earnings expansion appears priced in.
Teva’s long-term upside is also supported by pipeline catalysts. Duvakitug, a promising anti-TL1A immunology asset developed with Sanofi, has shown best-in-class Phase 2b data and could emerge as a key player in the $20B+ inflammatory bowel disease market. Meanwhile, the company expects six biosimilar launches through 2027, including Humira and Stelara biosimilars, adding further depth to the growth profile. Importantly, litigation risk is now largely resolved following the $4.25 billion nationwide opioid settlement, removing a key overhang and allowing management to focus on execution. With cost discipline, branded drug growth, and a rich pipeline, Teva looks poised for a re-rating. Based on a DCF model, the intrinsic value is estimated at $36.51, suggesting a significant upside from current levels.
Teva Pharmaceutical Industries Limited (TEVA) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 72 hedge fund portfolios held TEVA at the end of the fourth quarter which was 61 in the previous quarter. While we acknowledge the risk and potential of TEVA as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than TEVA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.