After having a great year and rising 30% Philip Morris (PM) stock price is down by more than 5% in the last 2 days. Many people are wondering why this is the case. Here is why the stock price went down. Goldman Sachs downgraded the company from Buy to Neutral and dropped the target price to $80 per share. Prior to the downgrade, the stock was trading at $79 and now it's down to $73. At the same time Citigroup also downgraded the stock and put a price target of $75 on it. Davenport also downgraded the stock from a buy to neutral. Interestingly, the analysts at Bank of America raised its target share price to 85. Bank of America was the only company to raise the stock's target price recently.
At the moment, analysts believe that the company will continue to deliver strong results, however, most of those strong results are already priced in and the stock doesn't have much room for upside. I personally think that now the stock has some room for upside since it plunged in the last 2 days and short term traders could take advantage of such a movement. This is also a good chance for long term holders of the stock to increase their position. The stock is known to issue decent dividends every year. The company recently increased its dividend payments from 64 cents per share to 77 cents per share and current yearly dividend is 4.18%. In the last 3 years, the dividend per share has been increasing consistently and rate of increase is 42%.
Earlier in the year, $73 was seen as the support level for this stock and it currently trades around this level. The next support level is thought to be around $72. Currently the stock trades at around the same value as it did in mid december, after which it started a strong rally lasting well into the new year.
In the last quarter, the company's revenues grew by 23.70% adjusted for fluctuations in the currency. The company's EPS grew by an impressive 33% in the same quarter. The company has huge market share in every continent and it is expected to keep growing in 2012. In the last quarter, the company increased its future earning outlooks.
In the long run, I am bullish for Philip Morris. I believe that the company has huge potential and the downgrades were unwarranted. Even the downgrader institutions admitted that the company was to deliver strong results in the near and long term. I suggest investors to watch this stock for a couple more days and buy shares if the value still looks promising. I would suggest buying the stock at around $72 per share and I expect the share prices to go around $85 by the end of the year.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in PM over the next 72 hours.
