Part 3


Johnson & Johnson (JNJ)

Our first stock from the XLV for April is Johnson & Johnson.

Company background and financial performance

Founded in 1886, Johnson and Johnson is an American multinational corporation that develops pharmaceuticals, medical devices, as well as consumer packaged goods.

The company is among the top 50 companies in the US measured by revenue and is a global player in the sector it operates. The company’s credit rating is AAA, making it one of the most valuable US companies. Johnson and Johnson’s biggest strength comes from its diversified business model. It operates through 250 subsidiaries, meaning that its business is very well diversified, allowing the company to withstand different economic cycles more effectively. In fact, J&J has got one of the largest research and development (R&D) budgets among the pharmaceutical companies.

In other words, thanks to its well-diversified business model, J&J is relatively resilient amid the macroeconomic turmoil.  Its pharmaceutical unit is currently performing at above market levels, supported mainly by its successful blockbuster drugs, such as Darzalex, Stelara and Imbruvica. The company’s Consumer health unit has also outperformed the market in 2020, while the Medical Devices segment has shown a drastic recovery in the past few quarters. Of course, the company has been facing challenges when it comes to its pricing, due to the high competition caused by other key players in the sector.

By looking at the financials of the company, we shall say J&J has been growing its sales steadily in the past 5 years, while the net profit has seen a bit of a decline in 2020 due to the coronavirus pandemic. Yet, the company still managed to report a strong net profit figure for the whole 2020 and proved that it could do well even during such tough times on the market.


Johnson and Johnson’s COVID 19 vaccine – A game changer?

J&J was the first pharmaceutical company out there to develop a one-shot vaccine against COVID-19 and it has already been approved in the US. The company has reported that it would produce and supply at least 100 million vaccines in the US in the first half of 2021.

Of course, that has been extremely positive for its share price performance and we have seen a massive rally to the upside recently, supported by the company’s vaccine news as well as its strong presence in the market it operates.


Q1 2021 financial results

Johnson & Johnson is expected to report its earnings for the first quarter of this year on the 20th of April and the expectations are for earnings of $2.31 per share, while the company delivered $2.30 per share in the same quarter of 2020. In case the result comes out better than expected we would expect to see a strong bullish reaction after the event that would give us a chance to make high profits to the upside in the short-term.


Technical analysis

By looking at the daily chart, we could see the strong uptrend that has been going on the JNJ stock in the past year. After the massive bullish rally, there was a bit of a profit-taking correction that sent the price down from the $172 highs to the lows at $150 where the price faced lots of buying pressure at that key support level and that led to an immediate bullish reaction afterwards that sent the price towards the $166. Since then, we have seen a little correction towards the current levels at $163. We believe the price is likely to face lots of bullish interest at around the first key support at $158, followed by the next strong support at $152-$150. In other words, we would be interested in buying the stock at around these two levels ahead of the earnings report on the 20th of April in order to make high profits to the upside in case of a strong financial result that is widely expected.


Chart: JNJ

We would wait for a bit further correction that could send the price towards the first major support at $158 and start opening our first buy positions at that point. Should the price drop further in the short-term, we would be interested in adding more to our buy positions at the next strong support at $153 where more buying pressure is expected. Our initial profit-taking target is set at $165-$170, followed by the next target at $180-$185 where we would be fully cashing in our profits.


Apple Inc. (AAPL)


Our first stock from the SPY for April is Apple Inc. (AAPL)

Company background and financial performance

Headquartered in Cupertino, California, Apple Inc. designs, develops and sells computer software, computer electronics and online services. Apple is considered among the Top 5 companies in the US together with Amazon, Facebook, Microsoft and Apple. The company has been a global leader in the sector it operates for many years now thanks to the huge success of its hardware products – the iPhone, the iPad tablet, the Mac personal computer, as well as the Apple Watch, together with the success of its software products and services, such as iOs, macOS, iTunes, Shazam and others.

Apple reported its Q4 2020 financial results in the end of January and delivered better than expected revenue and profit figures, which came out higher than analysts’ expectations.

What’s more important to mention here is that the company reported a record number of iPhone sales in the last 3 months of 2020, driven especially by a higher demand for their products in China. The company reported strong sales for its iPads and Mac laptops in that same quarter, driven by customers working and playing from home due to the coronavirus pandemic. Apple’s revenue for the 4th quarter came out 21% higher at $111.44 billion, while the earnings per share (EPS) figure was for $1.68, both beating analysts’ estimates.

As a matter of fact, the company’s iPhone sales account for 50% of its overall revenue. Apple’s iPhone sales accounted for $65.60 billion, beating the previous record that was set three years ago.

The company is expected to deliver its Q1 financial results on the 28th of April and the expectations are for earnings of $0.99 per share, while it delivered $0.64 per share in the same quarter last year.

Any figure higher than the expected would be seen as very bullish and a further confirmation for the company’s strong financial performance and market positioning in the sector it operates.


Technical analysis

Apple’s share price has been in a massive uptrend in the past year. The price had gone up from the $52 lows to the $145 in early 2021. Since then, we have seen a profit-taking correction that sent the price towards the current levels at $120-$123. In other words, the price has been consolidating above the strong support mark at $118-$120 and has been struggling to go lower ever since the end of February. The technical indicators started pointing higher from the oversold territory, giving further additional buying indications at that strong support mark. In fact, we don’t see much of a reason for Apple to drop much further from the current levels due to the fact that traders and investors have already cashed in profits and are now looking to position themselves ahead of the earnings season in the end of the month. In case of a better result than expected the share price is likely to rise right after the event and that would give us a chance to maximize our profitability to the upside. Moreover, the 50% Fibonacci retracement matches perfectly with the strong support at $118 while the Stochastics indicator has already crossed up in the oversold territory, giving further bullish indications.

We remain very bullish on the Apple stock considering the strong financial performance of the company and the great expectations for the Q1 results, together with the recent correction that is giving us a great opportunity to buy the stock at a decent discount and at a strong support mark and be able to maximize our profitability to the upside.


Chart: AAPL

We would start buying the stock aggressively at around $120-$121, just above the strong support at $118-$119. In case the price drops further in the short-term we would be interested in adding more to our buy positions at the next strong support at $110-$111, which would give us a chance to further maximize our profitability to the upside. Our initial profit-taking target would be at $130-$135, followed by the next target at $145-$150 where we would be fully cashing in our profits and waiting for another correction on the price that would give us a chance to buy one of our favourite stocks at a good discount again in the future.





Sincerely,

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