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Johnson & Johnson's Asbestos Woes: Experts Speak Up

Johnson & Johnson's Asbestos Woes: Experts Speak Up

After a 10 percent drop Friday, Johnson & Johnson (NYSE: JNJ) opened Monday’s session down another 2 percent following last week’s Reuters report that the company has known about asbestos contamination in its baby powder for decades.

While the potential for legal and regulatory fallout from the new report has certainly spooked the market in the near term, several Wall Street analysts have weighed in on the long-term outlook for J&J.

Bold Response Needed

Dean Crutchfield, founder of crisis management firm Crutchfield and Partners, told CNBC Johnson & Johnson needs a swift, bold response to the accusations that doesn’t involve hiding the truth.

“At the moment, they’re defending their stock price, and typically companies under pressure from a crisis react in an overly analytical way, but what they need to do is respond boldly,” Crutchfield said.

Morgan Stanley analyst David Lewis said Friday the Reuters accusations are light on science, as a new Johnson & Johnson ad campaign claims.

“We are not convinced that the article uncovered new evidence that was not presented to juries or part of the ongoing legal discovery process, but it has raised a level of awareness around the issue that did not occur after the $4.7bn verdict in July,” Lewis wrote in a note. Lewis reiterated his Equal-Weight rating and $153 price target for J&J stock.

Market Overreaction

CNBC's Jim Cramer said on Friday long-term investors shouldn’t be afraid of J&J stock: “Let’s say there’s $8 billion worth of potential problems with the talc litigation, they have $20 billion in free cash flow,” Cramer said.

BMO Capital Markets analyst Joanne Wuensch also stepped up to defend Johnson & Johnson.

“To us, the stock move looks like an overreaction: as a point of reference the last time JNJ finished down more than 10% was on July 19, 2002, declining 16%; it recovered six days later,” Wuensch wrote in a note. She also reiterated her Outperform rating and $154 price target for J&J stock.

Johnson & Johnson CEO Alex Gorsky will join Cramer's "Mad Money" program Monday evening.

At time of publication, the stock traded around $129.30 per share.

Related Links:

Johnson & Johnson Falls Following Baby Powder Asbestos Report

9 Policy Catalysts For Health Care Investors To Watch Before Year's End

Photo credit: Austin Kirk, Flickr

Latest Ratings for JNJ

Jan 2021Raymond JamesMaintainsOutperform
Jan 2021Credit SuisseMaintainsOutperform
Jan 2021Morgan StanleyMaintainsOverweight

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