J&J Adds More Than $15B in Six Months: How to Play JNJ Stock?

Core Viewpoint - Johnson & Johnson (J&J) stock has increased by 4.4% over the past six months, adding over $15 billion to its market value, despite facing several challenges including slowing sales in the MedTech segment and the loss of exclusivity for its drug Stelara [1][2]. Group 1: Business Performance - J&J's Innovative Medicine unit is a key growth area, with sales rising 4.4% in Q1 2025 despite the loss of exclusivity for Stelara, driven by products like Darzalex and new drug launches [5][9]. - The company expects to generate over $57 billion in sales from the Innovative Medicines segment in 2025, with anticipated growth of 5-7% from 2025 to 2030 [6][7]. - J&J's diversified business model, with over 275 subsidiaries and 26 platforms generating annual sales exceeding $1 billion, helps it withstand economic cycles [3]. Group 2: Challenges and Risks - The loss of U.S. patent exclusivity for Stelara in 2025, which generated $10.36 billion in sales in 2024, is expected to significantly impact J&J's sales and profits, with Stelara sales declining by 33.7% in Q1 2025 [8][9]. - Sales in J&J's MedTech segment are facing headwinds, particularly in China due to government cost-containment efforts and competitive pressures [12][13]. - J&J is dealing with over 62,000 lawsuits related to its talc-based products, which could create ongoing legal and financial challenges [14][15]. Group 3: Market Position and Valuation - J&J's stock has outperformed the industry, rising 5.3% year-to-date compared to a 1.2% decline for the industry [16]. - The stock is reasonably priced, trading at a price/earnings ratio of 13.9, lower than the industry average of 14.82 [20]. - The Zacks Consensus Estimate for 2025 earnings remains unchanged at $10.60 per share, while the estimate for 2026 has slightly decreased [23]. Group 4: Future Outlook - J&J considers 2025 a "catalyst year," expecting stronger growth in the second half of the year driven by new product launches and pipeline momentum [26][27]. - The company has been active in acquisitions, including the recent purchase of Intra-Cellular Therapies, enhancing its presence in the neurological and psychiatric drug market [27]. - J&J has increased its quarterly dividend by 4.8%, marking the 63rd consecutive year of dividend increases, indicating confidence in its long-term growth [28].