Will Johnson & Johnson Stock Recover After A 4% Fall In A Week?

by Trefis Team
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[Updated: Sep 15, 2021] JNJ Stock Decline

The stock price of Johnson & Johnson (NYSE: JNJ) reached its all-time high of around $180 just last month before a recent sell-off in pharmaceutical stocks resulted in JNJ falling to $165 levels currently. Last month, we discussed that based on historical performance, there were higher chances of a decline in JNJ stock over the next month. However, the recent decline can be attributed to rising concerns over the Biden’s administration’s plan to reduce healthcare costs, including negotiating the drug prices in its Medicare program. But will JNJ stock continue its downward trajectory over the coming weeks, or is a recovery in the stock imminent?

According to the Trefis Machine Learning Engine, which identifies trends in the company’s stock price using ten years of historical data, returns for JNJ stock average 4% in the next one-month (twenty-one trading days) period after experiencing a 4% drop over the previous week (five trading days). But how would the returns fare if you are interested in holding JNJ stock for a shorter or a longer time period? You can test the answer and many other combinations on the Trefis Machine Learning Engine to test Johnson & Johnson stock chances of a rise after a fall. You can test the chance of recovery over different time intervals of a quarter, month, or even just 1 day!

MACHINE LEARNING ENGINE – try it yourself:

IF JNJ stock moved by -5% over five trading days, THEN over the next twenty-one trading days JNJ stock moves an average of 6%, with a good 73% probability of a positive return over this period.

Some Fun Scenarios, FAQs & Making Sense of Johnson & Johnson Stock Movements:

Question 1: Is the average return for Johnson & Johnson stock higher after a drop?

Answer: Consider two situations,

Case 1: Johnson & Johnson stock drops by -5% or more in a week

Case 2: Johnson & Johnson stock rises by 5% or more in a week

Is the average return for Johnson & Johnson stock higher over the subsequent month after Case 1 or Case 2?

JNJ stock fares better after Case 1, with an average return of 5.7% over the next month (21 trading days) under Case 1 (where the stock has just suffered a 5% loss over the previous week), versus, an average return of 2.9% for Case 2.

In comparison, the S&P 500 has an average return of 3.1% over the next 21 trading days under Case 1, and an average return of just 0.5% for Case 2 as detailed in our dashboard that details the average return for the S&P 500 after a fall or rise.

Try the Trefis machine learning engine above to see for yourself how Johnson & Johnson stock is likely to behave after any specific gain or loss over a period.

Question 2: Does patience pay?

Answer: If you buy and hold Johnson & Johnson stock, the expectation is over time the near-term fluctuations will cancel out, and the long-term positive trend will favor you – at least if the company is otherwise strong.

Overall, according to data and Trefis machine learning engine’s calculations, patience absolutely pays for most stocks!

For JNJ stock, the returns over the next N days after a -5% change over the last five trading days is detailed in the table below, along with the returns for the S&P500:

You can try the engine to see what this table looks like for Johnson & Johnson after a larger loss over the last week, month, or quarter.

Question 3: What about the average return after a rise if you wait for a while?

Answer: The average return after a rise is understandably lower than after a fall as detailed in the previous question. Interestingly, though, if a stock has gained over the last few days, you would do better to avoid short-term bets for most stocks.

It’s pretty powerful to test the trend for yourself for Johnson & Johnson stock by changing the inputs in the charts above.

 

[Updated: Aug 18, 2021] JNJ Stock Rise

The stock price of Johnson & Johnson (NYSE: JNJ) has seen a rise of over 7% over the last twenty-one trading days, and it is also up 15% year-to-date. Note that such a move for JNJ stock is uncommon, and it has occurred less than 90 times over the last 10 years. The company reported upbeat Q2 results and it continues to benefit from market share gains for some of its key drugs, including Imbruvica and Darzalex. Furthermore, a rebound in volume of elective surgeries performed has boded well for its medical devices business in the recent past, a trend expected to continue in the near term. The company also raised its full-year outlook, bolstering its stock price growth.

But now that JNJ stock has moved 7% over the last month, will it continue its upward trajectory, or is a fall imminent? Going by historical performance, there is a higher chance of a decline in JNJ stock over the next month. Out of 88 instances in the last ten years that JNJ stock saw a twenty-one day rise of 7.5% or more, 51 of them resulted in JNJ stock falling over the subsequent one-month period (twenty-one trading days). This historical pattern reflects 51 out of 88, or about a 58% chance of a decline in JNJ stock over the coming month. See our analysis on Johnson & Johnson Stock Chances of Decline for more details.

Calculation of ‘Event Probability‘ and ‘Chance of Rise‘ using last ten years data

  • After moving 3.3% or more over a five-day period, the stock rose in the next five days on 53% of the occasions.
  • After moving 2.9% or more over a ten-day period, the stock rose in the next ten days on 54% of the occasions
  • After moving 7.5% or more over a twenty-one-day period, the stock rose in the next twenty-one days only on 42% of the occasions.

Predict average return on Johnson & Johnson (JNJ) Stock Return: AI Predicts JNJ Average and Excess Return After a Fall or Rise

Johnson & Johnson (JNJ) Stock Return (Recent) Comparison With Peers And S&P500

  • Five-Day Return: MRK highest at 4.8%; SPY lowest at 0.3%
  • Ten-Day Return: PFE highest at 10%; BMY lowest at -0.5%
  • Twenty-One Days Return: PFE highest at 26%; MRK lowest at 2.3%

Going by historical performance, while JNJ stock can see lower levels, 2020 has created many pricing discontinuities which can offer attractive trading opportunities. For example, you’ll be surprised how counter-intuitive the stock valuation is for Pfizer vs Merck.

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