RBC Capital Downgrades Allergan, But Still Keeps It As 'Core' Holding

In a report published Friday, RBC Capital analyst Randall Stanicky downgraded the rating on Allergan PLC (NYSE: AGN) from Top Pick to Outperform, while maintaining a price target of $361. The analyst believes that there are few catalysts for the stock, with limited near-term P&L upside.

"Valuation remains attractive against solid mid-teens multi-year EPS growth; we continue to see it as a core holding," Stanicky elaborated, while adding that despite a more than 23 percent year-to-date rise in valuation, the stock continues to be a robust growth story, still being priced reasonably.

Explaining the limited upside potential expected for the stock, the analyst said that there were various important products facing competitive threats, which could weigh on investor sentiment.

"While none individually are overly material on a more diversified base of business, generic competition on Namenda, the IPR/legal challenge to RESTASIS and long-term competitive uncertainty around BOTOX for migraine will continue to draw focus," according to the RBC Capital report.

While the analyst expressed lower concern regarding the latter two issues, he also emphasized that Namenda XR/IR might face a higher than anticipated generic impact. While the analyst expressed confidence regarding Allergan's earnings, going forward, near-term P&L upside appears to be in question.

"Namenda and generic Concerta are two important swing factors that will drive some variability and we have less conviction around the 2H2015E outlook," Stanicky added, while saying that there was unlikely to be any significant change to the 2Q guidance.