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Johnson & Johnson Stock Dips on Asbestos Cancer Verdict

Jefferies responded with a price-target cut for JNJ

Managing Editor
Jul 13, 2018 at 10:10 AM
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Shares of Johnson & Johnson (NYSE:JNJ) are lower in early trading, as investors digest the verdict of a St. Louis trial that concluded that asbestos in the company's talc-based products caused ovarian cancer in 22 women. The jury ordered Johnson & Johnson to pay $4.7 billion in damages. Shares of the Dow stock are down 0.7% at $126.89, at last check.

In response, Jefferies slashed its price target to $145 on JNJ, but maintained its "buy" rating. Analysts in general are split on the stock, with exactly 50% of the 18 firms covering the stock already offering tepid "hold" or "sell" ratings. However, the stock's average 12-month price target of $142.24 still stands at a premium to current levels.

Earlier this month, Johnson & Johnson stock broke north of a channel of lower highs and lows that had contained the shares since the early February correction. The stock has added 4.8% so far in July, set for its best month since October. Year-to-date, however, JNJ shares are still down roughly 9%.

Ahead of the verdict, options traders were increasingly bullish. This is evident per Johnson & Johnson stock's 10-day call/put volume ratio of 3.01 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) -- ranking in the 94th annual percentile. This indicates that calls have been purchased over puts at a faster-than-usual clip during the past two weeks.

Digging deeper, the expiring weekly 7/13 126-strike call saw the largest increase in open interest during the past 10 days, followed by the July 128 call -- the latter of which encompasses the company's earnings release, set for July 17. Echoing this, JNJ's Schaeffer's put/call open interest ratio (SOIR) sits at 0.85 and ranks in the 36th percentile of its annual range, indicating calls handily outnumber puts among options set to expire within three months.

 

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