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Earnings season has now formally started for us. Johnson & Johnson (JNJ: $149, flat yesterday and up 1% in overnight trading) has delivered its 4Q19 numbers. On the whole, things look good there.

 

By the time you read this, you know that $1.88 per share in earnings on $20.8 billion in revenue is right on target. This gigantic company is once again finding ways to raise the top line again after a few quarters of weak year-over-year comparisons. It's all about Pharma. Medical Devices remain the weak spot and despite all the muttering about litigation risk Consumer Products has been steady.

 

But Pharma is doing well. New blood cancer, colitis and prostate cancer therapies were approved in various markets last quarter while an innovative nasal spray for depression is already making waves in Europe. It could get an FDA decision in the next few weeks. All in all, drugs are already half of the company and all of its growth. As long as exchange rates go the right way, we're looking for a lot of growth here in the new year.

 

The numbers were good and largely expected. Management telegraphed this result three months ago and it's hard for a company this big to veer far from guidance in a short period of time. All we need here is for Johnson & Johnson to stay on course and ride out the ongoing drama around baby powder lawsuits. (By the way, despite a voluntary recall, the company didn't even find trace amounts of asbestos in a "contaminated" bottle.)

 

We also need to provide a few words on Splunk (SPLK: $157, down 1%), which got some fresh praise from an analyst at Argus Research who happens to be a long-term bull on the company.  Two years ago, people thought the firm was crazy for putting a $120 target on Splunk. Now here we are with that particular analyst's target rising to $190 simply to keep up with recent performance.

 

Why does Argus love Splunk so much? For them, it really boils down to the odds of the company getting bought out by one of the Silicon Valley giants coveting its Big Data platform. At $24 billion plus a big premium that would be a hefty buy. We are more impressed with the current revenue trend. If you can actually make money today on what a whole lot of prognosticators think will be a huge opportunity in years to come, you're doing extremely well. That's where Splunk is. We expect it to book close to $3 billion in revenue this year and then keep growing at an annualized rate of 20-30% for the foreseeable future.

 

What's impressive here is that Argus isn't even the most bullish firm on Wall Street where Splunk is concerned. There are people who say this should be a $250 stock in the near term. We were here at $46 almost four years ago and it's been a great ride. We look forward to the future. We hereby raise our $166 Target to $182 and our Sell Price from $132 to $145. Good investing!