When will Monsanto regain its Street-beating ways?


I was reading through some articles this weekend, when I found one from BusinessWeek, questioning the viability of herbicide producer Monsanto Co. (NYSE: MON).

The article focuses on the past six months, a period when MON shares have lagged behind the broader market, and then wonders if the stock is still a viable long-term investment. The story was prompted by last Thursday's earnings forecast for $3.10 to $3.30 per share in fiscal 2010, which was well short of the $4.10 that the Street expects.

There are reasons for Monsanto's slump, including generic Chinese competition to the company's business. No matter the reason, the stock is struggling, and the company's technical performance shows that there are struggles looming on the horizon for MON. With the stock consolidating along the $80 level, it has allowed its 50-week moving average to drop into the picture as resistance. MON has had some luck this year with this trendline, if you call luck closing atop the moving average three times since last September. Further resistance for MON is presented in the form of its 10- and 20-month moving averages. These two trendlines have teamed up to provide resistance since 2008, and it does not appear that their resolve is weakening.

Some analysts are hopeful that the stock has currently hit a low and is going to head higher -- I'm not quite as confident. That said, it is possible that Monsanto has seen the worst of times, as the company believes that 85% of its growth will come from seeds and genomics. However, other analysts believe that the company's earnings momentum has "stalled for the upcoming 12 to 24 months." If this is the case, then it could be a long two years for Monsanto, and for people bullish on the company.

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Last updated: February 13, 2012: 02:18 AM

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