Johnson & Johnson (JNJ) Buy or Sell Stock Guide

February 13, 2020

Are you looking for the analysis of Johnson & Johnson (JNJ) stock? Are you wondering what the bulls and the bears say about it?

If so, you came to the right place. In this stock guide, we will share with you 9 reasons to buy and 10 reasons to sell JNJ stock. You’ll get a perspective on what the bulls and the bears say about it.

The analysis below may be also helpful to you if you have any of the following questions about JNJ stock:

  • Is JNJ a buy or a sell?
  • Should I sell or hold JNJ stock today?
  • Is JNJ a good buy / investment?
  • What are JNJ analyst opinions, recommendations and ratings?

Let’s start with the bull case. Here are the reasons to buy JNJ stock:

1. The majority of J&J's near-term patent losses are for products that are hard to make, including the biologic drug Remicade, which should slow generic competition.

2. Diverse healthcare segments insulate J&J from downturns in the economy, offering a defensive growth opportunity with a stable and likely growing dividend.

3. Several of Johnson & Johnson's key drugs and pipeline drugs are specialty drugs that tend to carry stronger pricing power and lower regulatory hurdles for approval.

4. Johnson & Johnson struck several deals, which should boost its top line. The Cougar Biotechnology acquisition allowed Johnson & Johnson to strengthen its oncology portfolio especially in the areas of advanced prostate cancer, breast cancer and multiple myeloma. The acquisition has proved its worth with the approval of prostate cancer therapy, Zytiga.

5. Johnson & Johnson continues to work on strengthening its Pharma segment, which has been driving revenues over the past few quarters. Johnson & Johnson expects to launch or file for approval for more than 10 new blockbuster products by 2021. The company said that each of these products has blockbuster potential.

6. Apart from established products in the pharma segment, new products like Imbruvica, Xarelto and Darzalex are performing well. Zytiga and Imbruvica are notably successful launches in the company’s oncology portfolio. The company is also working on expanding the label of currently marketed products like Simponi, Stelara, Zytiga and Imbruvica.

7. Johnson & Johnson is looking to increase its presence in emerging markets as they hold immense potential. Given the huge potential, the company has set up manufacturing and R&D centers in Brazil, China and India, and has almost doubled its footprint in emerging markets in the last five years. These countries are trying to make healthcare accessible to more people primarily by improving insurance coverage. Johnson & Johnson intends to continue working on strengthening its pipeline in Japan as well as China.

8. JNJ forward dividend yield is 2.53%, higher than the industry (0.54%) and sector (0.11%) forward dividend yields. See JNJ forward dividend chart.

9. JNJ average analyst rating is Buy. See JNJ analyst rating chart.

Now that you understand the bull case, let’s look at the reasons to sell JNJ stock (i.e., the bear case):

1. Product recalls and manufacturing issues in the consumer business could dent Johnson & Johnson's powerful brand name in a segment where brand recognition is critical.

2. Potential legal action regarding product recalls for hip and knee replacements along with several consumer products could damage the company's image, cost billions of dollars, and create distractions for management.

3. Several of Johnson & Johnson's important drugs are facing increasing competition, which should slow the growth rate of the pharmaceutical group.

4. Quite a few products in the company’s portfolio including Invega and Ortho Tri-Cyclen Lo are facing generic competition. Moreover, biosimilar competition for Remicade entered several major EU markets in February 2015.

5. The labels of products like Remicade and Simponi contain warnings regarding the risk of cancer in children and teenagers. The inclusion of such warnings could lead to restricted sales of these products. In Feb 2010, the FDA approved a risk management program (RiskMap) to inform about the risks of erythropoiesis-stimulating agents (ESAs).

6. Johnson & Johnson has suffered its share of pipeline setbacks. These include failure to gain approval for ceftobiprole (the company returned global rights for the candidate to its Swiss partner, Basilea Pharmaceuticals), a third CRL for the supplemental new drug application (sNDA) for Xarelto for acute coronary syndrome (ACS) and the withdrawal of the EU application for an additional indication for Velcade for the treatment of patients with relapsed follicular non-Hodgkin lymphoma. Johnson & Johnson also announced that it no longer intends to seek EU approval for Risperdal Consta for bipolar I disorder.

7. JNJ stock price ($151.09) is close to the 52-week high ($153.99). Perhaps now is a good time to sell? See JNJ price chart.

8. JNJ quarterly revenue growth was 1.70%, lower than the industry and sector average revenue growth (2.99% and 2.57%, respectively). See JNJ revenue growth chart.

9. JNJ profitability is declining. The YoY profit margin change was -21.31 percentage points. See JNJ profitability chart.

10. JNJ PEG ratio (P/E adjusted for growth) is 2.93, and it’s high compared to its industry peers’ PEG ratios. See JNJ PEG chart.

Now let's look at the key statistics for JNJ:

Metrics JNJ
Price $149.93
Average Price Target / Upside $154.24 / 2.87%
Average Analyst Rating Hold
Forward Dividend Yield 2.53%
Industry Drug Manufacturers - Major
Sector Healthcare
Number of Employees 135,100
Market Cap $392.51B
Forward P/E Ratio 15.49
Price/Book Ratio 4.78
Revenue (TTM) $82.06B
YoY Quarterly Revenue Growth 1.70%
Profit Margin 18.42%

What are your thoughts on JNJ?

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