Tweaker has captured nearly all of Johnson & Johnson's price movement over the past year and has JNJ at "Caution/High Risk" - in other words, needing higher growth and/or profits to justify current price of $65.00. Tweaker's target price for JNJ is $60-62.00 (seen in chart below). JNJ is a solid company with global presence but it is of concern that JNJ has so many quality control problems and recalls.
Last week, Berkshire Hathaway cut its stake in Johnson & Johnson to 29 million shares at year end from 37.4 million in the previous quarter. JNJ shares have flat-lined for much of the past decade, trading within at $50-70.00 band, nearly at the same price it was in Jan. 2002, coincidentally since, "Worst CEO in 2011", William Weldon came into the position. During his tenure, JNJ has had the most recalls in its history.
The most important question is what can JNJ what can Johnson do to increase the relatively stagnant share price?
In April of last year, JNJ announced its merger with Synthes, Inc. a premier global manufacturer of orthopaedic devices. They entered into a definitive agreement whereby Johnson & Johnson will acquire Synthes for $21.3 billion, with the goal to according to their press release, to create "product development capabilities potential for technology convergence across Johnson & Johnson and bring a broader portfolio of orthopaedics solutions to more people around the world in developed and particularly in emerging markets."
Two years ago, Johnson & Johnson expanded into new long-term opportunities such as getting into the vaccine business by buying the Dutch biotech firm Crucell NV for $2.29 billion. This could further help the company in squeezing out extra profits in the long run.
Tweaker is looking for higher growth and/or profits to justify the current JNJ price and if JNJ's investments prove lucrative, JNJ could get the boost it needs to break its stagnant stock.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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