Medtronic in Corrective Recovery, Set to Resume Downtrend
2024.08.12 08:29
Medtronic (NYSE:) is a leading medical technology company based in Dublin, Ireland, but listed on the NYSE. With a market cap of over $100B, it is one of the big ones in medical device manufacturing. It used to be even bigger, though.
Sales growth has been close to zero in recent years, which explains why the stock price has come down from an all-time high of $136 in 2021 to $82 now.
Today, we’re going to examine the Elliott Wave structure of that decline for clues about the future.
The 49% crash from $136 to $69 a share can be seen as a five-wave impulse pattern. We’ve labeled it 1-2-3-4-5 in wave (A), where the five sub-waves of wave 3 are also visible and wave 4 is a triangle.
According to the theory, a three-wave correction follows every impulse. It looks like the first two waves of the retracement – A up and B down – are in place already.
If this count is correct, wave C of (B) can lift Medtronic stock towards the $100 mark, before the bears return in wave (C). Once they do, downside targets below $69 would make sense.
Besides, for a company growing at mid-single digits at best, a price-to-free-cash-flow multiple of ~20 feels expensive.
So the Elliott Wave chart above is not our only reason for caution. Medtronic‘s valuation is another.
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