The Bullish Case for Medtronic – February 24, 2021

An ascending triangle pattern has formed in the chart of Medtronic PLC (MDT).  This is a bullish pattern and if the resistance level is broken, a breakout could occur.

MDT is one of the largest medical device companies in the world. The company develops and manufactures therapeutic medical devices for chronic diseases. Its portfolio includes pacemakers, defibrillators, heart valves, stents, insulin pumps, spinal fixation devices, neurovascular products, and surgical tools.

MDT is recovering from the pandemic and posted growth in the fiscal third quarter 2021. The company saw demand for its ventilators increase during the pandemic and is winning share in an increasing number of its business segments. It has also benefited from recent product approvals in its pipeline.

MDT had $5.1 in cash as of the most recent quarter, compared with $3.8 billion in short term obligations. It also has a gross margin of 64.6%, higher than its industry average. The company reported its latest financial results yesterday with revenue coming in at $7.78 billion, up from $7.65 billion in the previous quarter.

The stock has a trailing P/E of 43.42, but a forward P/E of 19.38, indicating it may be undervalued when looking at future earnings. The stock has been trending upward since May and has shown mixed near-term momentum. It currently has an overall rating of B, which translates into a Buy in our POWR Ratings system.

Take a look at the 1-year chart of MDT below with my added notations:

Over the past two months, MDT has hit the $120 resistance (red) on multiple occasions. In addition, the stock has started a trend line of support (green) at the end of January. Together, these two lines have formed an ascending triangle.

Eventually, the stock will have to break either the $120 resistance or the trendline.  A long trade could be made on a break above $120.

Have a good trading day!

Author: Christian Tharp, CMT