Last Update 05 Dec 25

Fair value Increased 0.86%

JNJ: Future Reorganization And Litigation Outcomes Will Shape Risk Reward Balance

The analyst price target for Johnson & Johnson has been nudged higher, with fair value rising from approximately $200.82 to $202.54 per share, as analysts highlight slightly stronger long term revenue growth, modestly higher profit margins, and a richer future P/E multiple supported by an improving innovation pipeline and portfolio reshaping efforts.

Analyst Commentary

Recent research updates reflect a broadly constructive stance on Johnson & Johnson, with a growing number of firms highlighting improving fundamentals, a stronger growth profile, and a more compelling risk reward setup following the latest results and guidance.

Bullish Takeaways

Bullish analysts are raising price targets into the low to mid $200s, arguing that the market underestimates J&J's medium term earnings power and potential for multiple expansion as growth accelerates.
Several notes emphasize that the separation of the orthopedics business should simplify the portfolio, lift revenue growth by roughly 100 basis points, and support structurally higher margins for the remaining company.
Improving momentum in Innovative Medicine and MedTech, combined with strong execution on new product launches and label expansions, is seen as driving a new phase of above consensus top line growth.
Some strategists highlight that large cap biopharma valuations remain depressed versus the broader market, viewing J&J's diversified pipeline, litigation visibility, and defensive characteristics as catalysts for a re rating.

Bearish Takeaways

Bearish analysts with Neutral ratings acknowledge recent upgrades to targets but argue that near term upside is limited, citing a more balanced risk reward after the stock's recent move.
Ongoing overhangs from legacy product litigation and consumer headlines, even if largely ring fenced, are viewed as potential constraints on further multiple expansion.
Some commentary points to revenue pressure from key loss of exclusivity events and a need for the pipeline to execute flawlessly to offset these headwinds and sustain double digit earnings growth.
A subset of the Street prefers to wait for clearer evidence that portfolio reshaping and business separations translate into consistently higher growth and margin delivery before moving to more aggressive valuation assumptions.

What's in the News

Johnson & Johnson is in talks to acquire Protagonist Therapeutics in a multi billion dollar deal that would deepen their existing partnership around an oral immune disease therapy and expand J&J's immunology pipeline (Wall Street Journal).
Johnson & Johnson faces its first U.K. lawsuits over allegations that talc products cause cancer, with more than 3,000 claimants suing J&J and Kenvue UK, adding to the global talc litigation overhang (Reuters).
A Los Angeles jury awarded $966 million to the family of a woman who died of mesothelioma linked to talc, the largest talcum powder verdict against Johnson & Johnson to date, underscoring ongoing legal risk (Law.com).
The Trump administration is preparing a new probe into whether U.S. trading partners underpay for branded drugs, a move that could affect pricing dynamics for Johnson & Johnson and other large pharma companies (Financial Times).
Johnson & Johnson is part of a new industry consortium, alongside AbbVie and others, that will share protein small molecule structure data to train an AI model aimed at accelerating drug discovery (Reuters).

Valuation Changes

Fair Value: risen slightly from approximately $200.82 to $202.54 per share, reflecting a modestly higher intrinsic valuation.
Discount Rate: effectively unchanged at about 6.96 percent, implying a consistent risk and return framework.
Revenue Growth: increased marginally from roughly 5.22 percent to 5.23 percent, signaling a slightly stronger long term growth outlook.
Net Profit Margin: risen slightly from about 23.41 percent to 23.43 percent, indicating a modest improvement in expected profitability.
Future P/E: ticked up from approximately 23.60x to 23.78x, suggesting a modestly richer valuation multiple on forward earnings.

Johnson & Johnson is poised for growth in immunology and oncology despite facing challenges from loss of drug exclusivity, leveraging next-gen therapies for strengthened revenue.
Strategic investments in U.S. operations, acquisitions, and MedTech expansion aim to boost future earnings and efficiency, with potential restructuring in surgery to aid profitability.
Loss of exclusivity for key products and tariffs could significantly threaten revenue and margins, while ongoing litigation poses financial risks.

Catalysts

About Johnson & Johnson

Engages in the research and development, manufacture, and sale of various products in the healthcare field worldwide.What are the underlying business or industry changes driving this perspective?

Johnson & Johnson anticipates accelerated growth in their portfolio and pipeline, particularly in the Innovative Medicine sector, despite the headwind from STELARA's loss of exclusivity. This is expected to bolster revenues through next-generation therapies and significant market share gains in oncology and immunology.
The company's substantial investment of over $55 billion into manufacturing, R&D, and technology in the U.S. over the next four years is projected to expand capacity for advanced medicines and devices, potentially increasing operational efficiency and future earnings.
Recent acquisitions, such as Intra-Cellular Therapies, are expected to contribute substantial revenue streams, with products like CAPLYTA potentially reaching over $5 billion in peak sales, positively affecting the company’s revenue and EPS in the future.
Ongoing expansion within MedTech, highlighted by strong performance from acquired cardiovascular units Abiomed and Shockwave, as well as developments in robotic surgery, are expected to drive revenue growth and enhance adjusted income margins over time.
The company plans significant restructuring in their surgery business within MedTech to streamline operations and improve efficiency, anticipated to have short-term revenue disruptions but expected to enhance long-term profitability and margin expansion.

Johnson & Johnson Earnings and Revenue Growth

Johnson & Johnson Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Johnson & Johnson's revenue will grow by 4.7% annually over the next 3 years.
Analysts assume that profit margins will shrink from 25.0% today to 22.0% in 3 years time.
Analysts expect earnings to reach $22.9 billion (and earnings per share of $10.07) by about September 2028, up from $22.7 billion today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as $19.1 billion.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 22.8x on those 2028 earnings, up from 18.8x today. This future PE is greater than the current PE for the US Pharmaceuticals industry at 19.0x.
Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
To value all of this in today's terms, we will use a discount rate of 6.78%, as per the Simply Wall St company report.

Johnson & Johnson Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Loss of exclusivity for STELARA and the impact of biosimilar competition could significantly erode revenue from one of Johnson & Johnson's major products. This could affect overall revenue and net margins, especially in the innovative medicine segment.
Tariffs, particularly those related to exports to China, could increase costs and impact the net margins negatively, due to increased cost of goods sold from tariffs being relieved through the P&L in future periods.
The ongoing litigation related to talc, though controlled for now, poses a continual risk to financial stability and could impact net earnings and cash flow, particularly if adverse judgments or settlements occur.
The orthopedics segment faced headwinds, including competitive pressures and challenges in the spine and sports areas. Ongoing issues could impact revenue and earnings unless the planned innovations drive a turnaround.
Potential dilution from acquisitions such as Intra-Cellular Therapies and the impact of tariffs could affect operating margin improvement efforts, challenging overall earnings and net margins despite robust sales growth in some areas.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $177.468 for Johnson & Johnson based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $200.0, and the most bearish reporting a price target of just $155.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $104.1 billion, earnings will come to $22.9 billion, and it would be trading on a PE ratio of 22.8x, assuming you use a discount rate of 6.8%.
Given the current share price of $176.96, the analyst price target of $177.47 is 0.3% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

Analyst Commentary Drives Higher Valuation Targets for Johnson & Johnson Amid Positive Company Developments