Ricardo Pillai
3 min read
In This Article:
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 $16.89 as of May 14th. TEVA’s forward P/E is 6.47 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.
Teva Pharmaceuticals, the world’s largest generic drugmaker, is undergoing a remarkable transformation, as evidenced by its Q1 2025 results—marking its ninth straight quarter of revenue growth. Revenue grew 2% year-over-year to $3.89 billion, while adjusted EPS of $0.52 beat expectations. Free cash flow surged 238% year-over-year, highlighting improved operational discipline under CEO Richard Francis, whose strategy to shift Teva toward innovation is taking hold. Once seen as a stagnant generics firm, Teva is now gaining credibility in novel drug development, as shown by the performance of Austedo, which grew 39% and is on track for $2 billion in sales by 2025, Ajovy (+26%), and Uzedy (+156%). Innovative medicines now contribute a growing share of revenue, signaling a structural shift in the business. Meanwhile, Teva’s generics business, still a core foundation, grew 3% and continues to deliver stability and scale. Its vast generics pipeline, targeting $55 billion worth of originator drugs, will expand with new launches in complex generics and biosimilars, supporting a dual-engine model that balances cash generation with margin expansion. Teva’s cost-cutting initiative—the “Acceleration Phase”—is set to reduce costs by $700 million by 2027, streamline operations, and lift margins to 30%, aided by AI adoption and an 8% reduction in global headcount.
Financially, Teva has made major progress in deleveraging, with a clear goal to bring net debt-to-EBITDA below 2x. Operational risks like generic Revlimid losses and tariffs are being mitigated through manufacturing strength and efficiency gains. With a revitalized strategy, solid momentum, and an undervalued stock, Teva offers a compelling investment opportunity with potential 12-month upside to $25–27.
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.
