Street Calls of the Week
Investing.com -- Rothschild upgraded Kenvue to Buy, saying a U.S. health regulator’s plans for new warning labels on Tylenol were less severe than feared and that the consumer health company’s 20% stock drop this month had overshot the risk.
Shares are up 1.5% in premarket trading.
The U.S. Department of Health and Human Services this week said it would “act on acetaminophen” following studies suggesting a potential link between use of the drug in pregnancy and neurodevelopmental disorders.
The Food and Drug Administration issued an updated notice to physicians and began the process of initiating a safety label change.
But the HHS statement also acknowledged a “lack of clear causal evidence” and urged clinicians to “exercise their best judgement,” leaving the decision on prescribing to doctors.
Rothschild said the measures were more measured than investors had feared.
Tylenol, Kenvue’s biggest product, has been sold over-the-counter in the United States since the 1960s and makes up about 10% of group sales. Rothschild estimated that sales to expectant mothers represent less than 0.5% of Kenvue’s annual revenue.
“The past week’s publicity will likely have impacted sales but insufficient to warrant a 20%+ slump in Kenvue shares,” analysts wrote.
A 2023 lawsuit alleging a link between Tylenol and autism was dismissed for lack of credible evidence and HHS has not provided new scientific data.
Kenvue, which owns brands such as Neutrogena, Listerine and Johnson’s, has struggled since its 2023 spinoff from Johnson & Johnson.
With activist investors now holding about 2.4% of shares, no permanent CEO in place, and the board reviewing strategic options such as brand sales, Rothschild said it sees “a clear path to value creation.”
The broker cuts its price target by just 50 cents to $22.