Summary:
- Mylan (MYL) sank 24% on Tuesday after the company posted earnings that beat Wall Street expectations for earnings but missed on revenue.
- As this move is coming towards the end of its current market cycle, we expect a small bounce, but expect this to be followed by more downside risk.
The company reported earnings per share of $0.82 and total revenue of $2.5 billion, compared to analyst estimates of $0.79 and $2.7 billion. Management also reaffirmed its guidance, which is in line with expectations.
Facing an array of problems, CEO Heather Bresch had announced a strategic review on which, “There is a tremendous amount of work being done.” However, she was unable to give an update or a specific date on which she would provide the results. This did not assuage investor concerns.
Our approach to stock analysis focuses on market cycles. It is clear to us that MYL is towards the end the declining phase of its current cycle. This stock followed our analysis well, as you can see from the cycle patterns on the chart above. Our view is that a bottom is soon due, but that the subsequent bounce will likely be temporary given the MYL’s negative momentum.
For more from Slim, or to learn about cycle analysis, check out the askSlim Market Week show every Friday on our YouTube channel.
