As financial analysts know, no rule says large and long-lived companies need to be slowly growing investments. In that vein, Cantor Fitzgerald analyst Louise Chen on Feb. 20 reaffirmed her price target of $215 for Johnson & Johnson (NYSE: JNJ), suggesting that the stock could climb by as much as 33% from its current price near $161. Chen's estimate is an outlier, as the average price target of the financial analysts covering the stock is $175.
But, in the context of the company being one of the world's biggest businesses, with decent top and bottom line growth, and an extensive menu of upcoming catalysts, Chen's analysis is unlikely to be very far off-base, if it is at all.
2024 will be the first test of the new and lighter business model
The most significant performance factor that could cause Johnson & Johnson stock to outperform is its newly slimmed-down operating model.
In late August of 2023, J&J completed the spinoff of its consumer healthcare products segment, which is now publicly traded under the name Kenvue. Management advanced the spinoff because it'd enable the healthcare giant to focus more on the medical device and pharmaceutical segments.
There hasn't been enough time for the substantive parts of the plan to pay off yet. But 2024 could see it continue to report steady growth anyway as a result of projects it had in motion before the spinoff.
When adjusted to report only the segments retained in the spinoff, its normalized diluted earnings per share (EPS) rose by 39% year over year to reach $1.70 in Q4. Furthermore, Johnson & Johnson could commercialize as many as nine pharmaceutical programs this year, and it has a whopping 90 programs in its pipeline at the moment. In other words, it has quite a few opportunities to wow the market with its earnings results, clinical trial data, and regulatory news.
And that's bullish, even if the stock ultimately struggles to live up to the loftier estimates.
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Alex Carchidi has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Kenvue. The Motley Fool recommends Johnson & Johnson and recommends the following options: long January 2026 $13 calls on Kenvue. The Motley Fool has a disclosure policy.
