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St. Jude Medical (STJ) – Filling-the-Gap on Short Squeeze

November 24, 2009

St. Jude Medical (STJ) took a nasty beating last month as their earnings outlook and several analyst downgrades. Today we are seeing the first upgrade – all the way to a buy. This is creating a short-squeeze as it passes above resistance and creates a fill-the-gap scenario.

October downgrades:

Even so, we picked up shares in October, after the sell-off, and added to the position today as the the price broke above resistance. Technically this stock is poised to move higher and the fundamentals are showing a positive outlook.

STJ

According to Bloomberg:

St Jude Medical Inc (STJ) was rated new “Buy” at Morgan Joseph by equity analyst Bruce Jackson. The target price is $42.00 per share. Risks to attaining our price target include the timing and success of clinical trials, new product launch timing, availability of reimbursement, litigation, and healthcare reform…St. Jude Medical aims to deliver 15% EPS growth with a combination of new products, operating expense leverage, and share buybacks. Key factors in the diversified growth strategy are market share gains in cardiac rhythm management (CRM), continued growth in AF and neuromodulation, and acquired growth from Radi’s PressureWire.”

stjude

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Disclosure: Horowitz & Company clients may hold positions of securities mentioned as of the date published.

Morgan analyst says, “We are initiating coverage with a Buy rating and a $42 price target, which is 16x our 2010 EPS estimate of $2.68, at the upper end of the current comp group range of 13x-16x. St. Jude is a high-quality name in the group and deserves a premium valuation, in our opinion, because we believe it has better than average long-term growth prospects.

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Written by Andrew Horowitz · Filed Under Markets, Stocks 

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