Johnson & Johnson : Beginning of a bearish movement
Entry price | Target | Stop-loss | Potential |
---|
US$66.5 |
US$64.2 |
US$67.3 |
+3.46% |
---|
Johnson & Johnson has always the risk of a trial for illegal promotion about a drug. However the management and the U.S. authorities could reach an agreement to avoid a trial and would discuss the amount of at least USD 1.5 billion to be paid by Johnson & Johnson, which would make it one of the most expensive regulations so far for this type of dispute in the pharmaceutical sector.
From a fundamental viewpoint, the company is trading at a high level. Its “enterprise value/revenue” ratio is estimated at 2.6x for 2012 and the PER is 13.1x for the same period. Analysts polled by Thomson-Reuters have regularly revised downward EPS estimates in the last months.
Once USD 67 was hit, potential on the bullish consensus was depleted. The USD 61.8 area had stopped the last decline, allowing a significant rebound. Therefore, it would be a good opportunity to take a short position on the Johnson&Johnson’s stock to anticipate a downward movement to USD 64.2. A stop-loss order will be fixed at USD 67.3.
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