American International Group Shares Fail At Test of Resistance - Is A Big Fall To Follow?
American International Group Inc (NYSE: AIG) rallied nicely off of the recent lows but is now facing some key technical resistance just above current levels.
Can the stock rally past the barriers in front of it? Do the company's operations and growth prospects justify a lift in the stock price or is an extended period of consolidation or pulling back called for?
What The Bulls See
• Net profit margins of 13.73 percent that spin-off annual levered free cash flows of more than $36.41 billion.
• Some cheap valuation metrics: an enterprise value of $92.47 billion that far exceed the market capitalization of $75.64 billion, a price-to-book ratio of 0.71 and a price-to-sales ratio of 1.19.
What The Bears See
• A PE of around 11 that suddenly seems expensive when considering the 2015 estimated growth in revenues and expenses of 1.9 percent and 6.5 percent, respectively.
• Mixed balance sheet metrics: A debt-to-equity ratio of 35.38 percent (good for a financial company) and current ratio of 0.60 (not as good).
The Technical Take
AIG shares have been showing technicians signs of topping over the last three sessions and are starting to really follow through on the downside. Any close below $51.01 will confirm the bears' thesis that a move down to $46.91 (at least) is in progress. However, if the stock can set a floor at any point above that price level and then proceed to close above $54.40, a continued move north of $55 should occur.
That relative underperformance speaks volumes about how tough things are for the insurance sector, especially if it continues to be a muted interest rate environment. Short-sellers are likely to plant their flag in the AIG arena right at the $53.87 level and will remain stubborn in their bearishness unless and until a close above $54.40 occurs.
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