On Thursday, HSBC upgraded shares of Johnson & Johnson (NYSE:JNJ) from Hold to Buy, adjusting the price target slightly to $170.00 from $169.00. The change comes as the company's stock hit a three-year low, a move the analyst believes is not reflective of the company's stable fundamentals.
Despite facing challenges such as patent expirations and ongoing Talc litigation, HSBC anticipates that Johnson & Johnson will navigate these issues without experiencing negative growth.
The company's recent performance in the first quarter raised some concerns, particularly with its Carvykti product, which saw sales remain flat compared to the previous quarter. Johnson & Johnson attributed this stagnation to the timing of orders rather than a decrease in demand.
The product's recent regulatory approval for use in second-line treatment, an advancement from its previous fourth-line status, underscores its effectiveness and potential to be a significant growth driver as the company's other drug, Darzalex, continues to mature.
HSBC's outlook for Johnson & Johnson's oncology segment, which represents 37% of its Innovative Medicine division, is positive, with an expected growth rate of 9% for the rest of the decade. However, the rest of the pharmaceutical portfolio is projected to see a compound annual growth rate (CAGR) decline of 5%, or a 1% decline if excluding Stelara.
Overall, HSBC forecasts a 1.5% growth in Innovative Medicine for the period from 2024 to 2030. When combined with a 4.8% growth in the MedTech segment, the company is expected to achieve a sales CAGR of 2.8%. Additionally, with a predicted margin expansion of 260 basis points, HSBC projects an annual earnings per share (EPS) growth of 5%.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.