Johnson & Johnson stock forecast amid reports it plans to split into two

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on Nov 12, 2021
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  • Johnson & Johnson shares on Friday edged higher 1.44% amid reports it plans to split into two.
  • WSJ reported the company will separate its drug and medical devices business from the consumer products group.
  • The separation process is expected to take place within the next 18-24 months.

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On Friday, Johnson & Johnson (NYSE:JNJ) shares edged higher 1.44% amid reports the healthcare company plans to split into two. According to Wall Street Journal, JNJ wants to separate its drugs and medical devices business from the consumer products group, forming two publicly listed companies.

The report also indicates the separation process is expected to take place within the next 18-24 months. JNJ CEO Alex Gorsky told WSJ the split has nothing to do with the ongoing lawsuits over Johnson’s Baby Powder. 

Gorsky said:

The best path forward to ensure sustainable growth over the long term and better meet patient and consumer demands is to have our consumer business operate as a separate healthcare company.

Should you buy JNJ stock ahead of the split?

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From an investment perspective, Johnson & Johnson shares trade at an exciting forward P/E ratio of 15.78, making it a compelling option for value investors. 

On the other hand, while analysts expect its earnings per share to decline slightly by 4.20% this year, they also forecast a better rebound of 5.43% next year, before growing at an average annual rate of 8.12% over the next five years.

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Moreover, the stock trades at a reasonable dividend yield of 2.56%. Therefore, JNJ could also be an attractive option for dividend and growth investors.

Source – TradingView

Technically, Johnson & Johnson shares seem to be trading within an ascending channel formation in the intraday chart. However, the stock recently spiked to find resistance from the 100-day moving average, sparking a pullback.

Nonetheless, with the stock far from reaching overbought conditions, investors could target extended gains at about $167.62, or higher at $171.04, while $161.88 and $158.59 are support levels.

It may not be too late to buy

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In summary, although JNJ shares seem to have rallied 5.56% since the 12th of October, the stock is up just 5.70% this year, thus underperforming the S&P 500 index.

Therefore, with shares trading at a compelling valuation whilst offering exciting growth prospects, it could be time to invest in JNJ stock.

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