Stock Analysis | Viatris Outlook - A Stock at a Crossroads Between Weak Technicals and Mixed Fundamentals

1. Market Snapshot

Takeaway: Viatris (VTRS) is currently experiencing a rise in price (+4.25%) but faces bearish technical signals and mixed fundamental momentum. Investors should remain cautious due to the stock's internal diagnostic score of 2.14, which indicates a weak technical outlook.

2. News Highlights

Regulatory Uncertainty: A recent article highlights how the new FDA leadership could raise the bar for drug approvals, potentially leading to more volatility for pharmaceutical stocks like Viatris. This could affect investor sentiment, especially around key regulatory events.

Pharma Developments: Eton Pharmaceuticals recently received FDA approval for a new treatment, KHINDIVI, which might have a positive ripple effect on the broader sector. However, it is unclear how much this will influence Viatris directly.

Policy Shifts: Changes in US policies for vaccine approvals and recommendations may affect Viatris indirectly, depending on the company's exposure to related markets. These changes are expected to affect how vaccines are distributed and for whom they are recommended.

3. Analyst Views & Fundamentals

Viatris has received a neutral rating from analyst Matt Dellatorre of Goldman Sachs in the last 20 days. The simple average analyst rating is 3.00, while the performance-weighted rating is 2.08, indicating a mixed view between optimism and caution. These scores show a slight divergence from the recent price trend, which has seen a 4.25% rise.

Key fundamental factors and their values are as follows:

• Gross profit margin: 36.48%
• Inventory turnover ratio: 1.07
• Accounts receivable turnover ratio: 2.10
• Rate of return on total assets: -7.71%
• Net profit margin (NPM): -0.13%
• Annualized return on total assets: -15.43%
• Inventory turnover days: 168.26

According to the model, the Income tax / Total profit ratio (8.07%) and the Cash-UP metric (-0.85) have the highest internal diagnostic scores (3.00 and 3.00, respectively). However, the weak Gross profit margin (-0.0344) and Rate of return on total assets (0.0783) suggest that the company is struggling with profitability and asset efficiency.

4. Money-Flow Trends

Viatris has seen a generally positive trend in fund flows, with both retail and institutional investors showing a slight inflow. The overall inflow ratio is 0.50, and inflows are positive across small, medium, and large blocks. However, the extra-large block trend is negative, suggesting that larger institutional investors may be cautious. The internal diagnostic score for fund flow is 7.41, indicating relatively strong money flow performance.

5. Key Technical Signals

Technical indicators for Viatris paint a bearish picture, with the stock scoring an internal diagnostic score of 2.14. Here's a breakdown of the most impactful indicators:

• WR Overbought: Score 1.00 – This signal suggests overbought conditions and a likely pull-back.
• RSI Overbought: Score 1.00 – Similarly bearish, indicating the stock is overbought.
• Ex-Dividend Date: Score 1.00 – Historically linked to downward pressure.
• Dividend Record Date: Score 1.00 – Also historically bearish.
• Bearish Engulfing: Score 6.62 – A rare positive signal in an otherwise bearish setup.

Over the past five trading days, Viatris has seen multiple bearish signals, especially in the last few days of WR Overbought and RSI Overbought conditions. The key takeaway from the technical side is that the stock is weak and should be avoided.

6. Conclusion

Given the weak technical indicators and mixed fundamentals, Viatris appears to be at a crossroads. The internal diagnostic score of 2.14 signals caution from a technical perspective, while the fundamental score of 5.99 offers some optimism in certain areas like cash flow and income tax efficiency. However, the stock's bearish signals and regulatory risks make it a high-risk proposition at this time. Investors may want to consider waiting for a clearer trend or more positive momentum before entering the stock.