Deutsche Bank Upgrades Johnson & Johnson (JNJ) to Buy

Deutsche Bank upgraded Johnson & Johnson (NYSE: JNJ) from Hold to Buy with a price target of $110. Analyst Kristen Stewart sees sustainable growth and noted the company was flush with cash and has great credit, making it "a master of its own
destiny.”

"Since the May Pharma R&D day and given the JNJ's performance, we were warming up to the stock. On Friday, we met with J&J's mgmt and we left the meeting feeling more confident J&J was well-positioned for growth across all divisions including pharma despite its patent expirations. J&J has been active in portfolio mgmt, which we view positively. While it may have a few more small outbound transactions, inbound ones are now likely as its balance sheet capacity provides the opportunity to enhance growth. When and what it acquires remains unclear but we believe mgmt will be disciplined," said Stewart.

"We believe concerns around the growth outlook for J&J’s pharma business are overdone. While there are a number of patent expirations (including Remicade, which is significant) and risks related to the pipeline, we believe the depth of the pipeline can carry the company through. J&J expects to file more than 10 new molecular entities (NMEs) and more than 40 lines extensions by 2019. We see two drugs in particular that could be of blockbuster proportions that are low risk—IMBRUVICA (approved) and daratumumab (filed). While JNJ’s MD&D and Consumer segments have seen modest growth as of late, we believe both are poised for improved growth given the portfolio rebalancing, new product launches, and resolution of division specific issues," continued the analyst.

Stewart added, "J&J is one of the few with a AAA credit rating. With $34 billion in cash and marketable securities and just $19 billion in debt, J&J is “a master of its own destiny” free to pursue M&A and/or licensing opportunities to improve its growth profile and do so in the best interest of shareholders."

For an analyst ratings summary and ratings history on Johnson & Johnson click here. For more ratings news on Johnson & Johnson click here.

Shares of Johnson & Johnson closed at $91.37 yesterday.

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