Johnson & Johnson stock (NYSE: JNJ) has seen a 6% fall in a month, while it’s down 3% year-to-date. The company reported upbeat Q2 results last month, but it lowered its full-year outlook owing to the impact of foreign exchange, and this didn’t sit well with the investors. Also, the stocks of some pharmaceutical companies, including Merck (NYSE: MRK), Pfizer (NYSE: PFE), and Eli Lilly (NYSE: LLY), have been weighed down over the recent weeks following the concerns over the drug pricing bill. The bill will allow Medicare to control the drug prices for ten drugs in 2026, which will grow to 60 by 2029. This will also impact J&J’s blockbuster drug Darzalex.
Furthermore, J&J recently announced that it will stop selling its baby talc powder globally from 2023 and focus on cornstarch-based powder. Note that the company is facing 38,000 lawsuits related to its talc-based products. It stopped selling baby talc powder in the U.S. in 2020.
In our view, despite the recent fall, there’s only a little room for growth in JNJ stock. We estimate Johnson & Johnson’s valuation to be $186 per share, reflecting only an 11% upside from its current market price of $167. Our valuation represents a forward P/E ratio of around 18x based on our earnings forecast of $10.11 on a per-share basis for full-year 2022. This compares with an average of 17x seen over the last three years.
But what about the near term?
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Now that JNJ stock has seen a fall of 6% in a month, will it continue its downward trajectory, or is a rise imminent? Going by historical performance, there is a higher chance of an increase in JNJ stock over the next month. JNJ stock has seen a fall of 6% or more in a month 137 times in the last ten years. Of those, 93 resulted in JNJ stock rising over the subsequent one-month period (twenty-one trading days). This historical pattern reflects 93 out of 137, or about a 68% chance of a rise in JNJ stock over the next month. See our analysis of Johnson & Johnson’s Stock Chance of Rise for more details.
Calculation of ‘Event Probability‘ and ‘Chance of Rise‘ using the last ten years’ data
- After moving -3% or more over five days, the stock rose on 61% of the occasions in the next five days.
- After moving -5% or more over ten days, the stock rose on 68% of the occasions in the next ten days.
- After moving -6% or more over a twenty-one-day period, the stock rose on 68% of the occasions in the next twenty-one days.
This pattern suggests a higher chance of a rise in JNJ stock over the next five, ten, and twenty-one days.
Johnson & Johnson (JNJ) Return (Recent) Comparison With Peers
- Five-Day Return: BMY highest at 4.8%; JNJ lowest at -3.4%
- Ten-Day Return: BMY highest at 2.4%; JNJ lowest at -5.3%
- Twenty-One Day Return: BMY highest at 2.1%; JNJ lowest at -5.9%
While JNJ stock has only a little room for growth, it is helpful to see how Johnson & Johnson’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.
Furthermore, the Covid-19 crisis 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 IDEXX Laboratories vs. Entegris.
Despite higher inflation and the Fed raising interest rates, JNJ has seen a fall of 3% this year. But can it drop from here? See how low Johnson & Johnson stock can go by comparing its decline in previous market crashes. Here is a performance summary of all stocks in previous market crashes.
|S&P 500 Return||4%||-10%||91%|
|Trefis Multi-Strategy Portfolio||8%||-7%||267%|
 Month-to-date and year-to-date as of 8/14/2022
 Cumulative total returns since the end of 2016