Fuji optimistic CEO but can it make the switch to pharmaceuticals
Fujifilm Holdings (FUJI) better known for its cameras than its drugs is making a gradual switch into pharmaceuticals. The CEO is optimistic about the company’s future saying that the company will be able to switch from cameras and chemicals to pharmaceuticals because of the way their current chemical processing works. Apparently the switch isn’t as hard as investors think, at least that is in the eyes of the CEO.
The company has been fighting slowing demand for its cameras and its developing chemicals and is making very key acquisitions to grow into the drug industry. The transformation hasn’t been cheap, Fujifilm holdings has dumped almost $1 Billion to buy Toyama chemical, a company that is better known for bird flu pharmaceuticals.
Though the CEO has high hopes for the future, I’m not so sure that its transformation can take place and be profitable. Its camera business is weakening year by year and a quick move into pharmacueticals seems extremely difficult. The application of its chemical database to chemicals that can save the lives of patients seems to be a giant roadblock for a business that is so tied to its camera and optics business.
Nonetheless, an investment in FujiFilm Holdings could be extremely rewarding. The stock is well off its highs, losing most of its value since it looked to acquire Toyama Chemical. Right now the stock sits on a critical trendline that could be very profitable in the short run but some quick math must be done before calling an entry.
At $30 per share I think we’ll get a better entry, $28 per share would be prime but a stop loss should be placed not more than $.30 below the $28 level, if this stock falls through it will push lower before higher. Buying at $30 means you have about a 7% downside risk level, at $28 its all systems go with a 1% downside to stop at $27.70 per share. I’m willing to bet that this stock can rise from $28 to $33 after going back through $30 per share. That’s a return of 17%, with a risk of 1% if the stock touches $28 per share.
At $28 it’s a buy, at $30 you’re risking 7% to gain 10%, that’s your call. If the stock falls to $28 pick it up but keep the stops tight. Don’t hold this under $27.70 per share. Worst case scenario at $28 is you lose 1%, best case is a 17% return or greater if its pharma business carries it through the next quarter.
