Johnson & Johnson (NYSE:JNJ) — This leader in the pharmaceutical, medical device and consumer products industry has drug launches planned that should lead the industry’s growth.
Last November, it received FDA approval for a breakthrough therapy to treat double refractory myeloma. European approval was received in May 2016. Further, management believes it will have 10 new drugs from 2015 to 2019, each with the potential to achieve $1 billion in annual sales.
Restructuring of its medical device unit, announced in January 2016, is expected to save $800 million to $1 billion by 2018. Standard & Poor’s estimates 2016 and 2017 EPS of $6.73 and $7.01 and has a target price of $143 which is 20.7X their forward 12-month estimate of $6.90.
Further it rates JNJ as a four-star buy. JNJ pays an annualized dividend of $3.20, for a 2.8% yield, and has a quality rating of “A.”
This Dow member is in the process of breaking to an uptrend after topping on Aug. 1 at $125. Since then, the stock has been restrained by a downtrend line that roughly tracked its 50-day moving average. That line and the average were pierced last week when the stock gapped through resistance on very high volume but then retreated back to support and closed the open gap.
This technical action sets JNJ up for another run through the resistance at $116 to $117. With the political situation now resolved and an expectation of regulatory relief at hand, that blue-chip drug stock should be bought.
Thus, buy JNJ at $116 with the assumption that it will break through resistance and achieve a trading target of $135 for a proposed gain of 16% plus dividends.
