NEW DIRECTIONAL CALL PLAYS
Thermo Fisher Scientific, Inc. - TMO - close: 119.29
Stop Loss: 116.75
Target(s): to be determined
Current Option Gain/Loss: Unopened
Time Frame: 8 to 12 weeks
New Positions: Yes, see below
Why We Like It:
TMO is in the healthcare sector. The company recently acquired Life Technologies making the combined company the world's largest producer of scientific and laboratory equipment.
This is a pretty simple story. TMO has been firing on all cylinders with strong earnings growth. When TMO reported earnings in January the beat Wall Street estimates on both the top and bottom line and raised their 2014 guidance. They did it again on April 23d with its Q1 earnings report beating analyst estimates on the top and bottom line. TMO raised their 2014 EPS guidance again.
Earnings will likely continue to accelerate as the Life acquisition should generate noticeable cost and revenue synergies, potentially worth $85 million in just the first year.
Multiple firms have upgraded the stock. Goldman Sachs recently upgraded TMO due to expectations for strong organic growth. Goldman bumped their price target on TMO from $114 to $153.
Wall Street is bullish on TMO because the company is growing in Asia, specifically China. TMO currently has a goal of achieving 25% of its total revenues from the Asia-Pacific region by 2016.
Technically the stock looks strong too. TMO has a long-term up trend and appears to be breaking out from a three-month bull-flag consolidation pattern. Today's display of relative strength (+1.2%) is also a breakout above its 50-dma.
We do see potential resistance at $120. Therefore we're suggesting a trigger to buy calls at $120.25. If triggered we will start with a stop loss at $116.75.
TMO could have news tomorrow as the company will host an analyst day on May 20th.
Trigger @ $120.25
- Suggested Positions -
Buy the Sep $125 call (TMO140920C125) current ask $3.20
Entry on May -- at $---.--
Average Daily Volume = 2.0 million
Listed on May 19, 2014