Is JNJ stock finally ready to take off? – Magic Post

Johnson & Johnson today

JNJ

Johnson & Johnson

$147.03 -0.74 (-0.50%)

As of 01/17/2025 at 03:59 PM ET

This is a fair market price provided by Polygon.io. He learns more.

52 week range

$140.68

▼

$168.85

Dividend yield

3.37%

P/E ratio

21.28

Price target

$174.29

The deal will build on Johnson & Johnson’s 70 years of experience in neuroscience. Specifically, the company is now adding inside-Cellular Capleta® for its pharmaceutical portfolio. This is a once-daily pill that has been approved by the FDA to treat schizophrenia, and is the only FDA-approved medication to treat depressive episodes associated with bipolar depression. CAPLYTA is currently being reviewed for additional indications.

However, the acquisition also gives Johnson & Johnson access to Intra-Cellular’s promising clinical-stage pipeline that includes drugs to treat generalized anxiety disorder, psychosis, and agitation that can be part of Alzheimer’s disease.

Johnson & Johnson is clearly leaning toward mental health at a time when its importance has never carried more weight. However, after several years of deals, shareholders must wonder whether the attractive valuation is enough to consider JNJ shares in 2025.

The biopharmaceutical industry is a adapt-or-die industry. Among medical stocks, Johnson & Johnson is well-equipped to thrive in this industry. In addition to its diverse pipeline, the company’s strong balance sheet allows it to grow through acquisition.

Intra-Cellular is the latest example of this, but it’s not the only deal JNJ has made in recent years. In 2024, the company paid $13.1 billion for Shockwave Medical, and in 2022, it bought Abiomed for $16.6 billion.

This year, Johnson & Johnson is expected to achieve revenues of $88.5 billion. This is about 4% lower than the previous year. The company’s ability to pay for these acquisitions is not in doubt, nor do they take a significant portion of the company’s profits. But it brings the company’s net debt to a somewhat uncomfortable level of 66%.

However, investors are turning to biopharmaceutical companies that produce GLP-1 drugs; Some may want Johnson & Johnson’s investments to pay off in revenue before assigning a distinct value to the stock. This is reflected in the wait-and-see approach to JNJ stock. The company holds the dubious distinction of being one of the Dow Jones’ “dogs” in 2024. In the past three years, the total return for JNJ stock has been negative 5.3%. This is especially concerning when you consider the company’s 3.3% dividend yield.

While the average price-to-earnings (P/E) ratio of the S&P 500 is around 24.8 times, it’s worth noting that JNJ shares trade at an attractive forward earnings of 14.5 times as of January 15, 2025. The valuation comes with a dividend carrying A solid 3.3% return.

In fact, Johnson & Johnson is one of the companies that is part of the exclusive dividend kings. The company has been increasing its dividend for 62 consecutive years, and the company’s strong balance sheet supports those dividends.

With the stock down about 10% in 2024 compared to the S&P 500’s return of about 21%, there is room for JNJ to play catch-up as investors move away from technology stocks and look for areas of growth.

JNJ stock has been trading below its 50-day simple moving average (SMA) since late October. This coincided with the company’s third-quarter earnings report. However, as of midday trading on January 16, 2025, the stock is within 2% of that technically important mark.

A major catalyst for the stock could come when the company reports earnings on January 22nd. A significant break above this level may be a sign that investors are becoming more optimistic about the undervalued dividend king.

A break above the 50-day simple moving average may also coincide with Johnson & Johnson analyst forecasts on MarketBeat, which give JNJ stock a consensus price target of $174.41. This would give investors an 18.7% upside as well as a stable dividend.