On Wednesday, BofA Securities revised its price target for Johnson & Johnson (NYSE:JNJ (NYSE:JNJ)) shares, bringing it down to $170 from the previous $180 figure. The firm has kept its Neutral stance on the healthcare giant's stock.
The adjustment follows a market response where Johnson & Johnson's shares dipped by 2%, which was in contrast with the broader Drug Retail (DRG) index's modest decline of 0.3%. This reaction came despite Johnson & Johnson reporting a solid first quarter and maintaining its guidance midpoint.
The dip in share value is believed to be a reaction to the underwhelming performance of JNJ's Carvykti sales, which saw a 1% quarter-over-quarter decrease, and its Vision business, which experienced a 3% year-over-year decline.
The lack of expected sequential growth for Carvykti, particularly after management's previous quarter statements anticipating such growth, surprised investors. Management attributed the sales performance to timing and phasing of purchases.
Discussions with investors suggest that Carvykti may be losing ground due to competition from bispecific antibodies and other CAR-T therapies vying for the same treatment spots. Although the recent approval of Cartitude-4 is expected to contribute to growth for the rest of the year, there is ongoing debate about Carvykti's potential market share in the second-line treatment setting, given the uncertain benefits in overall survival.
Furthermore, the potential for competitors to enter the market sooner than anticipated is heightened by the FDA's likely acceptance of minimal residual disease (MRD) biomarkers for accelerated approvals. This could allow rivals like Gilead/Arcellx to challenge JNJ's position earlier than expected.
Despite these challenges, the focus remains on commercial execution from key growth franchises, and investor sentiment may improve with better-than-expected quarterly results and pipeline updates.
Looking ahead, BofA Securities suggests that the 2024 guidance for Johnson & Johnson appears achievable, with the 2025 target of $57 billion in Pharma sales and forthcoming pipeline readouts being key factors. The lowered price target reflects a more cautious outlook on Carvykti sales, yet maintains a neutral view on the stock's overall prospects.
InvestingPro Insights
Recent metrics from InvestingPro show that Johnson & Johnson (NYSE:JNJ) has a strong financial foundation and investor-friendly practices. With a market capitalization of $348.09 billion and a robust gross profit margin of 69.18% over the last twelve months as of Q4 2023, the company demonstrates significant profitability. Notably, the adjusted P/E ratio stands at 20.73, suggesting a reasonable valuation relative to near-term earnings growth. Moreover, Johnson & Johnson's commitment to shareholders is evident through a dividend yield of 3.14% and its impressive track record of increasing dividends, now for 54 consecutive years.
InvestingPro Tips highlight that management's aggressive share buybacks and the stock's low price volatility are key considerations for investors. Additionally, with the stock trading near its 52-week low and analysts predicting profitability for the year, Johnson & Johnson remains a prominent player in the Pharmaceuticals industry. For investors seeking more in-depth analysis, there are over 10 additional InvestingPro Tips available, which can be accessed with the coupon code PRONEWS24 for an extra 10% off a yearly or biyearly Pro and Pro+ subscription.
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