Valeant, The Morning After: This Is What Wall Street “Research” Capitulation Looks Like

When one eliminates all the noise, the Valeant story was very simple and boiled down to two simple things: a debt-funded rollup which needed a constant influx of new acqusitions to grow non-GAAP earnings faster than the rate at which its debt was growing (while maintaining a low cost of debt low), and a sellside chorus of worshiping penguins screaming “buy, buy, buy” over each other, with ever higher price targets to keep the influx of new outside buyers pushing he stock to record highs, thus keeping the cost of new M&A low.

The first part changed when VRX stock imploded from nearly $300 to $31 in less than one year, ending the days of the Valeant rollup (the company spent more on M&A last year than its current stock price) as the dirty underbelly of Valeant was finally revealed yesterday in the most bizarre conference call in recent history.

And now, the “morning after”, we finally have the unwind of the sellside narrative.

Recall that as recently as yesterday,there were 11 buys, 10 holds, and just 2 sell recommendations, with an average 12 months price target of $131.

The myth is now over, and as of moments ago, the sellside revulsion has arrived, and suddenly the average price target is down by over $30.

To be sure, Bloomberg has not accounted for nearly half of the sellside coverage yet, all of whom are busy currently slashing their forecasts.

But nowhere is the humiliation greater than in the actual Valeant research reports, which we have screengrabbed below for embarrassing posterity, as follows:

JPM