Johnson & Johnson (JNJ) Stock Plunges on Baby Powder Scandal
Investors in Johnson & Johnson (JNJ) stock spoke loudly and clearly on Friday after Reuters issued scathing accusations against the company. Reuters’ surprise report alleged that key J&J executives and personnel knew for decades that the company’s iconic baby powder product contained cancer-causing asbestos. But still, they allegedly failed to disclose it publicly. The company denied the allegations immediately and vigorously, likening the claims to “an absurd conspiracy theory.”
JNJ Stock Plunges
Despite the company’s denials, J&J’s stock plunged nearly 12% from the previous day’s close at one point on Friday — sliding from around $147 down to a Friday low near $130 on sharply elevated volume — which erased almost four months of stock gains in the process. The one-day slide lost the company nearly $40 billion in market value.
Down Sharply from Recent All-Time High
Immediately prior to Friday’s plummet, the stock had been trading slightly off a new all-time high just below $149. By the time the dust settled on Friday, JNJ had pared some of its losses. But at the end of the day, the stock still closed down 10% for the day (and nearly -5% year to date), right around its 200-day moving average.
What Happens Next?
The key question now is, what happens to J&J and its stock going forward? If the allegations are true, the long-term implications for Johnson & Johnson could be enormous. At this point, though, the facts just haven’t been thoroughly verified yet. So we could just be seeing a knee-jerk overreaction by investors.
One thing, however, is somewhat more certain — this asbestos scandal is not likely to go away anytime soon. Investors, as we know, don’t like uncertainty. So the heavy pressures on J&J’s stock are likely to remain, at least in the near-term.
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Chief Market Strategist at The Technicals
With more than two decades of experience as an equity analyst for several major research firms, Don has covered individual stocks (both technically and fundamentally) across a wide variety of sectors and industries, including tech, financial, and retail. He has been quoted regularly in key financial media like Bloomberg and Reuters. Contact Don