Barclays Betting on More JNJ Upside in 2020

Johnson & Johnson has been on a strong uptrend recently

Dec 19, 2019 at 9:26 AM
facebook twitter linkedin

Analysts' top 2020 picks are starting to roll in, and Barclays this morning mentioned Johnson & Johnson (NYSE:JNJ) as a stock that could be strong for bulls in the coming year. In a note, the brokerage firm wrote that the blue-chip drugmaker is still trading at a discount due to this year's litigation issues, and in response it upped its view to "overweight" from "equal weight" with a price target of $173, which is the highest of all covering analysts, according to Thomson Reuters' Eikon.

JNJ shares have already been in a sharp uptrend in recent weeks, really ever since they bounced from the $130 level in mid-November. By the numbers, the healthcare giant has gained 10% going back three months, outpacing the broader S&P 500 Index (SPX) during that time. The shares closed Wednesday at $143.19, just below their 52-week high of $144.98 from June.

Options traders have certainly been bullish. Data from the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows a 10-day call/put volume ratio of 3.88, which ranks in the 100th annual percentile, meaning there's been an extreme interest in long calls over puts.

During this two-week time frame, the biggest increases in open interest have occurred at the January 2020 145-strike call, along with the February 145 and 155 calls. Anyone who bought those contracts is betting on upside for Johnson & Johnson to start the new year. It's certainly not a bad time to buy premium on JNJ, based on the Schaeffer's Volatility Index (SVI) of 14%, a reading that's in the low 5th annual percentile.


Special Offers from Schaeffer's Trading Partners