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How Will Johnson & Johnson's COVID Vaccine Affect Its Stock?

By Keith Speights and Brian Orelli, PhD - Feb 9, 2021 at 6:09AM

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The answer is different for the long term than for the short term.

Healthcare giant Johnson & Johnson (JNJ -0.28%) recently announced results from late-stage clinical study of the company's COVID-19 vaccine candidate. The news didn't cause a huge immediate move for J&J's share price. In this Motley Fool Live video recorded on Feb. 3, 2021, writers Keith Speights and Brian Orelli discuss what the longer-term impact of Johnson & Johnson's COVID vaccine could be for its stock.

Keith Speights: Let's go backward in time a little bit. One of the big COVID vaccine announcements from last week came from Johnson & Johnson, and Johnson & Johnson is worlds apart from a company like Vaxart. It's a healthcare giant. J&J reported lower overall efficacy for its vaccine than what Pfizer and Moderna posted. I think J&J's overall efficacy was 66%.

But Johnson & Johnson's vaccine requires only a single dose, which is a marked difference, and its results were really promising at preventing severe cases of COVID-19 with an 85% efficacy. Brian, now that the dust has settled a bit after J&J's announcement, what impact do you think the company's COVID vaccine could have for its stock, say over the next year and over the longer term?

Brian Orelli: Yes. Over the next year, I think it's basically nothing because they said they aren't going to profit from the pandemic, so whatever revenue they get off after selling the vaccine will basically just cover the manufacturing costs and research and development costs.

Over the longer term, it just depends on how long the immunity lasts. If we end up having enough variance that we need to get injected every year, well, then now they could start selling it for a profit and certainly, it will help their top line and bottom line a little bit. Although Johnson & Johnson is obviously a really large healthcare company, so adding a couple of billion dollars in sales per year is not going to move the revenue needle that much.

Speights: This is just something that just occurred to me, Brian. Do you see Johnson & Johnson as potentially even more of a global play with this vaccine than even a Pfizer or Moderna?

Orelli: Certainly, because of the storage requirements, I think it can be refrigerated, and then of course, because it's a one dose. One dose will obviously help, especially in rural areas, and where it's harder for people to come back for a second dose at a certain time. I think, globally, yeah, Johnson & Johnson is probably the best play there, and AstraZeneca, too, for the same reasons.

Speights: Yeah. I guess J&J might have a little edge because of the single dose.

Orelli: Yes. AstraZeneca is the better temperature requirement. But it does still require two doses.

Speights: Yeah. I think you're exactly right. Investors need to realize with Johnson & Johnson, it's just so huge that even a successful blockbuster vaccine is only going to make a ripple in its financial fortune. It is just that big. You wrote an article years ago, Brian, that I still remember to this day. I love how you said it. You said that any time is a great time to buy Johnson & Johnson stock if you hold it long enough.

Orelli: Yeah, I think what I did was I went and looked at the peaks and valleys of the stock chart, and divided the peak and divided the valley, either way, you would beat the S&P 500. If you bought at the valleys, you're going to beat the S&P 500 more than when you bought it at the peaks. But even buying at the peaks, you still beat the S&P 500 over the same time frame.

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Stocks Mentioned

Johnson & Johnson Stock Quote
Johnson & Johnson
$178.96 (-0.28%) $0.50
AstraZeneca PLC Stock Quote
AstraZeneca PLC
$67.11 (0.61%) $0.41
Pfizer Inc. Stock Quote
Pfizer Inc.
$53.81 (-0.33%) $0.18
Moderna, Inc. Stock Quote
Moderna, Inc.
$145.80 (7.36%) $10.00
Vaxart, Inc. Stock Quote
Vaxart, Inc.
$3.65 (7.35%) $0.25

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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