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On Wednesday, Canaccord Genuity reaffirmed its Buy rating on Kenvue Inc (NYSE:KVUE), with a price target of $29.00, as the company navigates post-spinoff challenges. With a current market capitalization of $46.3 billion and trading at $24.13, InvestingPro analysis suggests the stock is currently overvalued relative to its Fair Value, despite maintaining impressive gross profit margins of 58%. Kenvue, which was spun out of Johnson & Johnson (JNJ), has experienced various difficulties, including a significant product liability lawsuit, which has since been resolved. The company also faced decreased demand in key markets and suffered from JNJ’s prior underinvestment in key brands, leading to weaker sales.
Despite these challenges, Kenvue’s Self Care brands such as Tylenol, Zyrtec, and Motrin have shown strong performance, while its Essential Health brands have managed to maintain their market position. However, the Skin Health & Beauty (SH&B) segment has struggled to rebound from the lack of investment by JNJ.
Canaccord Genuity’s analysis raises the question of whether a separation of Kenvue could help unlock shareholder value. The firm suggests that if any part of the business were to be sold or spun off, it would likely be the underperforming SH&B segment. Their sum-of-the-parts (SOTP) valuation estimates Kenvue’s shares could reach $32, which represents a 33% increase from current levels and exceeds their price target based on 24 times their fiscal year 2026 earnings per share estimate.
Further, Canaccord Genuity believes that if Kenvue can enhance its operations, particularly within the SH&B segment, the SOTP valuation could approach $38 per share. This would signify a 57% upside from current levels, attributing more value to the SH&B segment as it reaches best-in-class peer performance. Canaccord Genuity’s stance reflects confidence in Kenvue’s ability to overcome its post-spinoff obstacles and improve shareholder value through strategic business decisions.
In other recent news, Kenvue Inc. has reported its first-quarter 2025 earnings, which exceeded analysts’ expectations. The company achieved an adjusted earnings per share (EPS) of $0.24, surpassing the forecast of $0.23, and reported revenues of $3.74 billion, above the anticipated $3.68 billion. Despite a slight decline in organic sales by 1.2%, Kenvue maintained strong market positions in key categories like face care and pain relief. The company also issued $750 million in Senior Notes with a 4.850% interest rate due in 2032, as part of a public offering underwritten by Citigroup (NYSE:C) Global Markets Inc. and Deutsche Bank (ETR:DBKGn) Securities Inc.
Additionally, Citi analysts raised their price target for Kenvue to $24.50 from the previous $22.00, maintaining a Neutral rating on the stock. This adjustment followed the announcement of a new Chief Financial Officer, which is seen as a potential strategic move. Kenvue reiterated its organic sales growth guidance for 2025 but lowered its EPS guidance due to tariff impacts. The company plans to use the proceeds from the Senior Notes for general corporate purposes, as outlined in their SEC filing.
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