CNBC’s Jim Cramer on Thursday told investors why he thinks the stock of Johnson & Johnson is performing well this year even as the broader healthcare sector lags.
“With so much momentum, but still a reasonable valuation, I think J&J can keep running, maybe for a while,” he said. “The next target is the company’s early 2022 all-time high of $186 and change, within sight, up less than ten bucks from here. After that? I say it could go through $200.”
Johnson & Johnson’s stock has been weighed down for years by lawsuits related to its talc products — so Cramer suggested it might be a surprise to some that the company has been able to “defy the gravitational pull of this health care bear market.” Shares are currently up more than 23% year-to-date.
While Cramer said Johnson & Johnson’s legal issues aren’t resolved, he suggested Wall Street is starting to look past them in part because of a recent change to its legal strategy, as well as the strength of its pharma business. The drug maker is no longer seeking sweeping bankruptcy settlements, and it is instead fighting the lawsuits in court. To Cramer, there now seems to be a feeling that “the plaintiff’s lawyers pursuing these cases have overplayed their hand.”
Although market has largely soured on big pharmaceutical names, Cramer pointed out that Johnson & Johnson is not purely a pharmaceutical company. It has a fairly large medical device arm that supplements the core drug business, he continued. The company’s medical device business is a source of steady growth, Cramer said, especially its cardiovascular category. He also pointed to Johnson & Johnson’s technology in other areas like robotic surgery and neurovascular care.
Cramer said he likes the company’s drug portfolio as well, saying it’s been strong since Johnson & Johnson spun off its over-the-counter business two years ago. But the pharma giant is facing a patent cliff with one of its key drugs, Stelara, which is used to treat autoimmune conditions, Cramer conceded. However, Johnson & Johnson has a number of other treatments boosting sales, especially drugs to treat certain cancers.
“Frankly, there’s more to the pharma strength than I have time to get to, because the drug business here is so enormous,” he said. “In total, J&J has thirteen drugs with double-digit growth rates, and overall, the rest of the drug portfolio’s growing up so well that…the loss of exclusivity for Stelara — afterthought.”
“Our results reflect the depth and strength of our uniquely diversified business,” a spokesperson for Johnson & Johnson told CNBC. “We expect elevated growth in the second half of the year and have a lot to look forward to over the next six months with game-changing approvals, such as the recent FDA approval of INLEXZO in bladder cancer and submissions anticipated in areas like lung cancer, major depressive disorder, psoriasis, surgery and cardiovascular.”
