Mohacsy's Safe Portfolio Member Forum

[dexprs]

Will remain holding JNJ, it is a core position for my accounts.
J&J: You Can Only Stretch That Valuation So Far -- Barron's Blog
DOW JONES & COMPANY, INC. 2:18 PM ET 9/20/2017
Symbol Last Price Change
JNJ 132.65down -2.57 (-1.9%)
QUOTES AS OF 02:39:05 PM ET 09/20/2017
Back in April, Barron's recommended buying shares of Johnson & Johnson(JNJ) , arguing that the shares sold off too sharply after its first-quarter earnings report. Since then, J&J's stock has gained 9%.

Today, Goldman Sachs's Jami Rubin told investors to find the exit. She downgraded the health care conglomerate from a Neutral to a Sell and set a $130 price target, which suggests the stock could fall 2% in the next year.

Rubin's bearish call in J&J does not extend to the broader pharmaceutical industry, which she views as "attractive." But while J&J's pharma division has improved and growth could accelerate, Rubin warns that pressure on key products, coupled with slow growth in the medical device division and pressure on consumer products leaves the healthcare conglomerate growing profit and sales over the next several years at a pace well below the broader industry.

How slow? Rubin sees J&J growing sales at a 5% annual clip over the next half decade and see EPS growth at 7% over the same span. And to her mind, that single-digit growth makes it hard to justify J&J tarding at 18 times 2018 earnings estimates.

Within our coverage, JNJ has been the largest beneficiary of the rotation into defensives post the sell-off triggered by pricing fears that started in 2H15. Since July 2015, JNJ is up 37% versus the SPX, XLV and LC pharma peers, +21%, +9% and +6%. With subsiding pricing concerns, we see a risk of a rotation into other pharma stocks with more exposure to renewed product cycles. More broadly, we believe JNJ's lack of optionality for value creation -- high value pipeline assets, transformative M&A and operating leverage -- relative to peers, challenges the sustainability of its outperformance. We prefer names like ABBV, BMY and LLY with more identifiable, needle-moving catalysts. We note a potential sale/spin-out of consumer, a move we have been advocating since early 2016 (see 'Is it time to let JNJ Consumer go free and prosper?'), is a risk, though we think the likelihood of management moving in this direction is low.

Now at $132.67 a share, J&J has fallen almost 1.9% in today's market action.

More at Barron's Stocks to Watch blog, http://www.barrons.com/stocks-to-watch