Reinitiating Coverage of Perrigo at $47.50; Shares Look Fairly Attractive

We are picking up coverage of Perrigo, a leading private label supplier of generic over the counter (OTC) drugs and a manufacturer of branded self-care products, with a fair value estimate of $47.50 per share. Shares look nearly 20% undervalued, having fallen roughly that amount since the company announced weaker 2021 earnings guidance three months ago as a result of higher input costs and supply chain disruptions. We expect these pressures to completely alleviate by 2023 as supply chain constraints lessen, and we anticipate a pick-up in operating margin beginning in 2022. In addition, the company recently settled a longstanding income tax dispute in Ireland regarding the sale of Tysabri, reducing a large liability over the company’s head since 2015, and we see the current valuation as a great entry point on the stock.