JNJ Stock Up After Analyst Turns Bullish on Litigation Outlook

Bernstein believes investors have already priced in the worst-case scenario for JNJ stock

by Josh Selway

Published on Oct 11, 2019 at 10:43 AM

Johnson & Johnson (NYSE:JNJ) shares are up 1.7% today at $131.29, after Bernstein said it believes the company will make progress on settling its $10-$12 billion in legal liabilities over the next year, adding that the worst-case scenario has already been priced into the stock. The brokerage firm upgraded its opinion to "outperform" from "market perform" and lifted its price target to $155 from $148.

This comes just a day after the healthcare giant was ordered to pay $8 billion following a case around its drug Risperdal. JNJ shares are up just 2% on a year-to-date basis, and were recently rejected at the 200-day moving average.

Despite this somewhat negative outlook recently, short-term options traders have preferred calls. For instance, the Schaeffer's put/call open interest ratio (SOIR) of 0.88 ranks in the 18th annual percentile, showing that it's rare for near-term call open interest to outweigh put open interest. This is due to the roughly 26,000 positions open at the front-month October 135 and 140 calls, the top two open interest positions overall.

Some bears have been targeting JNJ, though. Data shows a 17.1% spike in short interest in the last reporting period, and short interest is now at its highest point of 2019.  Still, the 16.7 million shares dedicated to short interest represent just 2.2 times the average daily trading volume.

Overall, Johnson & Johnson analysts have mixed views, with half those in coverage handing out "hold" ratings. The average 12-month price target, meanwhile, is hovering near the $150 level, which is where JNJ stock peaked late last year.


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