Just a day after Credit Suisse reinstated an Outperform rating on Johnson & Johnson JNJ based on future gain from Actelion, BTIG and Atlantic Equities downgraded the stock from Neutral to Sell and Underweight, respectively, for nearly the opposite reason.
Atlantic Equities: Weak Setup For 2018
Despite the downgrade, Atlantic Equities’ Steve Chesney bumped up his price target by a dollar, from $112 to $113.
The analyst recognizes that Johnson & Johnson has several therapies moving through the pipeline on target, but believes they will be insufficient to drive significant growth.
“We see only 2–3 credible, near-term, [greater-than] $1 billion opportunities,” said Chesney.
Chesney also thinks investors are too dismissive competitor data, which detracts from a bullish view in the near term.
Fundamental weakness could be covered up by gains from Actelion in the second half of 2017, but will likely be revealed in early 2018 regardless.
Overall, headwinds moving into fiscal 2018 seem to be brewing, and Chesney sees only single-digit pharmaceuticals growth ahead.
BTIG: ‘Correction Is Overdue’
BTIG analyst Dane Leone set a $110 price target on the stock, representing a 20-percent downside from Thursday’s close.
“Our review of the Pharmaceuticals segment suggests lackluster sales growth through 2021,” said Leone.
The analyst’s model considers expected “blockbuster” drug launches and acquired growth through Actelion, but ultimately concluded with only 3.75 percent growth, significantly less than the company’s projected 5+ percent.
The model also sees declining growth rates year-over-year through 2021.
Regarding Actelion, Leone expects “little synergy, and near zero upside from current consensus estimates.”
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