In what many analysts are calling a frothy market, Johnson & Johnson (NYSE:JNJ) must be wondering what gives? The iconic big pharma company is being held to a mighty high standard. It’s true that Johnson & Johnson is supposed to be a steady Eddie stock without a lot of volatility. But that hasn’t stopped many stocks from drawing wild interest from buyers.
And those stocks weren’t developing a vaccine to treat a global pandemic. The good news for investors is that the company looks to be exceeding those expectations.
On January 26, Johnson & Johnson delivered an earnings report that saw the company beat estimates on both the top and bottom lines. But that’s not a new event for JNJ. The company has a proven history of beating analysts’ estimates. And that pattern held even during this global pandemic.
The Next Leg Up
To be fair, JNJ stock is nearly 20% higher than where it was on October 1. And the stock has advanced nearly 10% since the start of the year. But the stock has recently pushed through to an all-time high. And it’s likely to go higher.
However that’s not because of what the company’s other business units are showing. It’s due to the increasing likelihood that JNJ will be the next company to deliver a Covid-19 vaccine. The company announced that it will have results from its Phase 3 trial by the end of January. And in a press briefing on January 25, Dr. Anthony Fauci said that, presuming the Phase 3 trial results are as expected, the company should be submitting an emergency use authorization (EUA) in just a few weeks.
This vaccine differs from the Pfizer (NYSE:PFE)/BioNTech (NASDAQ:BNTX) and Moderna (NASDAQ:MRNA)vaccines in two key ways.
First, Johnson & Johnson’s vaccine will require just a single shot. This means when the company says it will be delivering 100 million doses by the end of April, then (theoretically) 100 million Americans will be fully vaccinated. That’s great news for cities and states that are continuing to feel the economic weight of the Covid-19 mitigation efforts.
Second, the JNJ vaccine does not have the ultra-cold storage requirements of the other vaccines. This will simplify the logistics for getting the 100 million shots in arms.
JNJ Stock Has More Juice
It’s fair to ask “and then what?” regarding JNJ stock. After all, what will happen to the stock after the vaccine is widely available? The good news for Johnson & Johnson is that it should see a revival in its medical devices business. As you know, many hospitals have had to limit or cancel altogether elective procedures. These are not only lucrative procedures for the hospital, but they also contribute significantly to Johnson & Johnson’s bottom line.
And, when the new normal begins to look like the old normal, a remnant of these days will remain. If nothing else, I suspect that – for many – there will be a heightened awareness of being amply supplied with over-the-counter remedies. And we’ll take more care to disinfect surfaces. These are areas that fall into JNJ’s wheelhouse.
So although speculative interest in the stock may wane, the company’s other business units should pick up the slack. Estimates for U.S. gross domestic product are moving higher on the belief that the economy will reopen strongly in the second half of the year. It’s unlikely to perceive that JNJ will not benefit from that growth.
Buy JNJ Before the Phase 3 Results Are Released
By January 31, and likely before, JNJ will release its Phase 3 results. Let’s be honest. These haven’t been closely held secrets. If there was a reason for concern, executives from the company would have gotten out in front of it during the earnings call. They didn’t and that means that it won’t be long before there is another tool for doctors and nurses to use to combat the global pandemic.
Interested investors should take a position on the stock with the likelihood that it will climb. And considering that Johnson & Johnson is a Dividend King with over 50 years of dividend increases, value-minded investors have that to look forward to as well.
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