Is Johnson & Johnson a buy amid rising COVID cases and a shift towards defensive stocks?

May 20, 2022 2:19 PM ETJohnson & Johnson (JNJ)VOOBy: Jason Capul, SA News Editor11 Comments

Johnson and Johnson french headquarters building entrance

Jean-Luc Ichard/iStock Editorial via Getty Images

Wall Street remains fearful about the economic outlook, with the major U.S. equity averages pushing further lower throughout 2022. However, amid this overall decline, Johnson & Johnson (NYSE:JNJ) has held out better than most. Does the stock remain a buy as investors scramble for defensive plays in a weak market?

Staying Above Water in a Sinking Market

JNJ has advanced 2.2% on the year so far. This modest return compares favorably to the overall market, which has seen the Vanguard S&P 500 ETF (VOO) drop 18.5%.

JNJ also peaked to a record high less than a month ago when the stock traded at $186.69 back on Apr. 25. JNJ has since retraced its gains, slipping around 6% to $175.55 a share.

Looking at its recent results, the firm reported Q1 revenue that rose almost 5% from last year to reach $23.43B. This came as the firm saw increases in sales from its pharmaceutical division and its MedTech segment.

Status of COVID-19

Johnson & Johnson stands as one of the leaders in COVID vaccinations, giving it a strong connection to the pulse of the pandemic.

COVID cases have seen an uptick lately as the CDC data outlines a rise in both reported new cases and hospitalizations since the beginning of April. Seven-day average cases rose from 25,535 on April 1 to 101,130 on May 18. Moreover, hospitalizations seven-day average went from 1,486 on April 1 to 3,250 on May 17.

Moreover, New York City entered the "high" COVID-19 alert level under the Centers for Disease Control and Prevention guidelines on Tuesday.

Healthcare as a Safety Play

The financial community remains uncertain about the future state of the economy. As such, investors have been searching for safety. From a traditional standpoint, healthcare is among the more insulated market areas, holding up better than others in shaky economic situations

Year-to-date the sector as a whole is down 8.4%, outperforming all the major averages and seven of the eleven S&P sectors. As such, JNJ finds itself in the right market area at the right time.

Is JNJ a Buy?

Wall Street mostly seems to view JNJ in a neutral light. Over the last 90 days, 10 of 18 analysts surveyed by Seeking Alpha list the broad-based healthcare firm as a Hold. At the same time six list the stock as a Strong Buy and one analyst gave the firm a Buy rating.

Only one analyst lists the company as a Sell. See analyst breakdown below:

Believers in JNJ have high-profile company. Famed investor of Ray Dalio of Bridgewater Associates increased his positions in JNJ to 4.35M shares from 3.10M according to the funds recent 13F filing. Additionally, Seeking Alpha contributor David Trainer is bullish on JNJ, highlighting the company’s fundamentals.

At the same time contributor PatientValueInvestor is not a buyer at the current moment, outing that Johnson and Johnson shares seem fairly valued right now - if not a bit stretched.

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