Johnson & Johnson Begins Final Stage Trial of COVID-19 Vaccine; Target Price $170

Johnson & Johnson, one of the world’s largest and most comprehensive manufacturers of healthcare products, said on Wednesday that it has begun its large-scale, pivotal, multi-country Phase-3 trial for its COVID-19 vaccine candidate, sending shares as high as 2%.

The company expects the first batches of the COVID-19 vaccine, JNJ-78436735, to be available for emergency use authorization in early next year, if proven to be safe and effective.

Following this announcement, Johnson & Johnson shares closed 0.16% higher at $144.44 on Wednesday. However, the stock is still down about 1% so far this year.

The company, which is well-known for consumer products like Band-Aids, said it will enrol up to 60,000 volunteers across three continents and will study the safety and efficacy of a single vaccine dose versus placebo in preventing COVID-19.

Johnson & Johnson added that the vaccine, if successful, is estimated to remain stable for two years at -20°C and at least for three months at 2-8°C. This makes the vaccine candidate compatible with standard vaccine distribution channels and would not require new infrastructure to get it to the people who need it.

Johnson & Johnson stock forecast

Seven analysts forecast the average price in 12 months at $166.86 with a high forecast of $175.00 and a low forecast of $158.00. The average price target represents a 14.23% increase from the last price of $146.07. All those seven equity analysts rated “Buy”, none rated “Hold” or “Sell”, according to Tipranks.

Morgan Stanley target price is $170 with a high of $204 under a bull scenario and $110 under the worst-case scenario. SVB Leerink reiterated an “outperform” rating on shares of Johnson & Johnson. Zacks Investment Research lowered shares of Johnson & Johnson from a “hold” rating to a “sell” rating and set a $150 price target for the company.

A number of other equities research analysts have also recently issued reports on the stock. Stifel Nicolaus lowered shares of Johnson & Johnson from a “buy” rating to a “hold” rating. Bank of America reissued a “buy” rating. At last, Credit Suisse Group reissued a “buy” rating.

It is good to hold now as 50-day Moving Average and 100-200-day MACD Oscillator signals a mild selling opportunity.

Analyst views

“Our price target of $170 for JNJ is based on a 19.0x multiple off of our base case 2021e EPS, supported by our SOTP analysis. We assume J&J trades at a mid-single-discount multiple with S&P 500 given defensive-oriented profile, growth acceleration in Pharma, and improving fundamentals in Consumer/MD&D, balanced by litigation overhang,” said David Lewis, equity analyst at Morgan Stanley.

“Litigation liability has been more than reflected in J&J shares, in our view, creating a meaningful valuation disconnect vs. the S&P. Pharma-driven acceleration is poised to drive the multiple higher in 2020 led by blockbuster franchises, pipeline launches and easing comparables. Momentum in MD&D and Consumer segments should drive a more balanced growth profile which is less reliant on Pharma,” Lewis added.

Upside and Downside Risks

Upside: 1) Pharmaceutical growth accelerates to the HSD sustainabily. 2) Opioid and talc litigations are settled. MD&D growth accelerates – highlighted by Morgan Stanley.

Downside: 1) Litigation overhang persists / legal liabilities are greater than anticipated. 2) Pharma pipeline is unable to offset biosimilar and competitive risks. 3) COVID-19 impact to MD&D is more severe. Turnarounds in Consumer and MD&D fail to materialize or slower than expected.

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