It may only be January 2, but the analysts at JPMorgan aren't wasting any time. Analyst Michael Weinstein downgraded J&J stock to neutral from outperform. However, he's maintaining his $150 price target for the stock, which implies about 7% upside from current levels.
Given the lower rating yet higher price target, it's not surprising to see the stock's lacking reaction to JPMorgan's move. Although Weinstein remains "fundamentally bullish" on J&J, he makes the case that at 17.9 times 2018 earnings estimates, there are simply more attractive stocks to own.
Ironically, Weinstein wasn't the only bull for these stocks Tuesday. Bank of America/Merrill Lynch analyst Bob Hopkins upgraded Baxter to buy from neutral, bumping his price target to $73 from $64. The target implies about 14% upside from current levels.
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As for Abbott, Morgan Stanley's David Lewis upgraded the stock to overweight from equal weight and raised his price target to $67 from $60. Lewis' price target implies about 17% upside from current levels. New product launches should drive organic growth for Abbott, as revenue and profit growth accelerate. This "premium growth will likely be rewarded with a premium multiple," Lewis contends, driving Abbott stock higher.
So the verdict isn't necessarily that J&J is a bad stock to own. Instead, it's that J&J stock has less upside than the 14% and 17% some analysts see in Baxter and Abbott, respectively.
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This article is commentary by an independent contributor. At the time of publication, the author had no positions in the stocks mentioned.