Gold prices steady ahead of Fed decision; weekly weakness noted
On Tuesday, Goldman Sachs analyst Asad Haider upgraded shares of healthcare giant Johnson & Johnson (NYSE:JNJ) from "Neutral" to "Buy," simultaneously raising the price target to $172 from the previous $157. The new price target suggests a 15% potential upside from the stock's current position.
Haider's optimistic outlook is partly based on the belief that market concerns regarding the loss of exclusivity (LOE) for JNJ's drug Stelara are overstated. Goldman Sachs anticipates that the impact of the LOE is already reflected in the stock price, and that the company's future growth prospects are not fully appreciated by the consensus. The company's strong financial position is evident in its impressive 70% gross profit margin and 54-year history of consecutive dividend increases, with a current yield of 3.3%.
The Innovative Medicine business, which accounts for approximately 65% of Johnson & Johnson's revenues and a significant 83% of its profit, is expected to drive the company's growth. This segment is seen as particularly crucial for the stock's value as it enters new product cycles in various large markets, including inflammatory bowel disease (IBD), psoriasis, neuropsychiatric disorders, multiple myeloma, bladder cancer, and EGFR mutated non-small-cell lung cancer.
Goldman Sachs notes that historically, pharmaceutical stocks' multiples often bottom out roughly one year prior to major LOEs. This historical trend, if repeated, could indicate a favorable outlook for Johnson & Johnson's stock performance moving forward.
The upgrade reflects a positive sentiment on the part of Goldman Sachs regarding Johnson & Johnson's ability to navigate the challenges associated with the Stelara LOE and capitalize on the upcoming product cycles in its Innovative Medicine pipeline.
In other recent news, Johnson & Johnson has completed the acquisition of Intra-Cellular Therapies (NASDAQ:ITCI), Inc., enhancing its Innovative Medicine division with new treatments for schizophrenia and bipolar depression. The acquisition is expected to contribute approximately $0.7 billion in incremental sales for 2025. Additionally, Johnson & Johnson announced that its drug TREMFYA has shown positive results in a Phase 3b study for psoriatic arthritis, meeting key endpoints and demonstrating the ability to slow joint damage progression.
UBS has maintained its Buy rating on Johnson & Johnson, with a price target of $180, noting strong prescription growth for TREMFYA. RBC Capital Markets also reaffirmed its Outperform rating with a $181 price target, citing potential growth from the company's oncology treatments. Meanwhile, Moody's has highlighted Johnson & Johnson's financial resilience amid ongoing talc litigation, maintaining its Aaa long-term issuer rating and stable outlook.
Despite legal challenges, Johnson & Johnson's solid cash reserves and business strength are expected to mitigate potential liabilities. The company continues to focus on its Innovative Medicine segment, which includes promising treatments like RYBREVANT plus LAZCLUZE for lung cancer.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.