In an article I wrote in mid January on this company I said:
"Dominion Resources (NYSE: D) is a very bullish stock and has been all through 2011 and into 2012. We believe it may move another 20% before it slows down."
At the point I wrote the article, it was trading at $50.98 and another 20% would take the stock to around $61.00. Currently it is trading at $54.48.
The big question is whether this stock can move up past $60 or not. It has had a nice run but the stock is also showing signs of slowing down. This is important to investors who are looking at this stock, not only for its dividend, but also for its growth.
Earnings
Dominion reported Q2 EPS of $0.59, $0.04 worse than the $0.63 that analysts projected. There were two reasons they missed forecasts. The first reason was the costs of restoration after the Mid-Atlantic's June 29th storm. The second being lower margins at its merchant generation plants. On top of this, mild weather caused less demand for electricity. But it expects a better third quarter. Originally it was revised downward like so many other companies from $1.00 to $0.90 and since has been revised upward to $0.95 with a nice dividend yield above 4%.
Insider Buying
Presumably the only reason a director of a company would choose to take hard-earned cash and use it to buy stock in the open market, is that they expect to make money - maybe they find the stock very undervalued, or maybe they see exciting progress within the company, or maybe both. Over the last six months, Mark J. Kingston, Director at the company purchased $1.6 million worth of stock.
Does the recent insider buying mean the stock will keep moving up more? Analysts are not convinced the stock will continue to be bullish and are stating as much.
Analysts
- JPMorgan upgraded Dominion Resources from Underweight to Neutral with a price target of $51.00. Since the stock was trading at $54.00 at the time, it believes the stock has peaked.
- UBS Investment Research resumed its coverage with at Neutral and raised its price target from $40 to $54.
- Equities research analysts at Barclays Capital boosted their price target on of the company from $48.00 to $52.00.
- Deutsche Bank downgraded shares of Dominion Resources, Inc. from a "buy" rating to a "hold" rating in a research note to investors on Monday, June 20th.
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As we continue to make our observations about this stock, we can see a negative divergence taking place in the RSI. This is a 6-week formation and it is well formulated, which signifies a weakness in the direction of the present trend. From my original article in January, I believe that Dominion Resources may be on its last leg up and has a real probability of leveling out here soon. Not only can we see this with a weakening of its strength, but we can also see it when analysts are targeting its price either where the stock is currently trading or a little bit less.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
