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January 25, 2006
JNJ Misses a Week and Stern Sinks Sirius
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From Dow Jones: Johnson & Johnson (JNJ) posted quarterly net income of $2.2 billion (73 cents a share), compared with $1.2 billion (41 cents) earned for the same period in 2004. Revenue for the latest quarter fell by 1.1% to $12.6 billion. The company noted that the quarter consisted of only 13 weeks in 2005, as opposed to 14 weeks in 2004. According to a poll by Thomson First Call, analysts on average had estimated that the company would have adjusted earnings of 73 cents a share, on revenue of $13.18 billion.
Is JNJ insinuating that the analysts did not factor in the missing week in their forecast? Come on! The company missed the revenue estimates. Moreover, JNJ probably provided the estimates to the analysts. What a lousy excuse. In any case, one look at the charts shows that this stock has been in trouble and remains in trouble. The stock has been trending lower since April and has yet to forge a higher high. Gaps in November and January failed to hold and the stock broke support at 60 with high volume yesterday. While I don’t expect a blood bath in this Consumer Staple stocks, I do not expect higher prices as long as key resistance at 64 holds. More likely, I would look for the stock to work its way towards the mid 50s.
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Careful what you wish for. Howard Stern debuted on Sirius the second week of January and the stock just continues lower. There are a number of possible reasons, but two seem to stand out. First, Stern is sitting on 34.4 million shares and will likely be selling some of these. Second, Stern can say what he wants. Infinity Broadcasting censored Stern in an effort to keep him on the airwaves. Stern is now free of this censorship and can say what he wants. That is a scary thought. Personally, I could stand the show when it was censored. An unleashed Stern is likely to be even worse, or better, depending on your view. This is clearly a love-it or hate-it show and Sirius is betting big that enough will love it. I am not so sure and the stock price seems to agree. There are enough people to hate the show and this will be a turn off. You win some and loose the rest. Is that a way to run a business?
The stock formed a bearish engulfing and gapped lower in mid December. A little profit taking would be normal after the Oct-Dec run, but this is more than just profit taking. The stock is already trading at its October lows and showing relative weakness. There is support around 6, but it would take a move above key resistance at 6.5 to reverse the current downtrend.
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Posted by Arthur B. Hill at January 25, 2006 06:41 AM