What Could Push JNJ Stock Higher From Here?

While the market fixates on the STELARA patent cliff, the rest of Johnson & Johnson's (JNJ) business is quietly accelerating. Excluding the legacy drug, the company grew in double digits for the quarter. The Innovative Medicine segment absorbed a massive 920 basis point headwind from STELARA, yet still posted 7.4% growth. This is not a company treading water, but a portfolio already hitting its next stride.

Rating Change

No specific analyst rating change was mentioned in the article, but the analysis suggests that the conventional view on JNJ may be overly pessimistic. The strong performance of the rest of the business could prompt analysts to revise their estimates.

Analyst Rationale

The analysis focuses on the fact that JNJ is not a company standing still, but a portfolio already achieving its next growth phase. The strong double-digit growth excluding STELARA shows that innovation in other products is compensating for the decline of the key drug.

Context

JNJ's competitors such as Eli Lilly (LLY), AbbVie (ABBV), Merck (MRK), and Pfizer (PFE) face similar challenges with patent expirations of key drugs. JNJ's performance in this context may give it a relative advantage.

What We Conclude

Investors may be underestimating JNJ's underlying strength. If the rest of the product portfolio continues to grow at double-digit rates, the stock could be undervalued. However, the STELARA patent cliff remains a significant challenge to monitor.