An unloved health-care stock gets a welcome nod in this AI-obsessed market
Health-care stocks aren't getting much of a look in this AI-driven market. That makes a Wall Street upgrade of Johnson & Johnson a bit of an outlier — and a pleasant surprise. Leerink analysts lifted J & J shares to a...
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An important development from the financial markets: Health-care stocks aren't getting much of a look in this AI-driven market. That makes a Wall Street upgrade of Johnson & Johnson a bit of an outlier — and a pleasant surprise. Leerink analysts lifted J & J shares to a buy equivalent from hold on Wednesday, citing the company's slate of new drugs, including Icotyde, a medicine for severe plaque psoriasis, and Inlexzo, which treats bladder cancer.
"Our thesis is that strong new drug momentum will drive accelerating revenue growth and stock outperformance," Leerink wrote in a note to clients. Shares of J & J rose over 2% Wednesday, but are still off roughly 4% from when we initiated our position in early April. Year to date, the stock is up 10%, while the Health Care Select Sector SPDR ETF (XLV) is down 9%.
Economic Details
"Healthcare has just been so out of favor in a market that only has eyes for AI," said director of portfolio analysis for the Club, Jeff Marks. At the foundation of Leerink's thesis is Icotyde, an oral pill that launched in March and is part of J & J's strategic push to aggressively compete with injectable solutions. The drug is also in phase 3 trials for the treatment of inflammatory bowel disease, which Leerink views as a potential catalyst in 2028.
For fiscal year 2026 alone, analysts forecast $405 million in Icotyde sales, 50% above the Street consensus of $268 million. The analysts also raised their sales growth targets by 24-34% annually over the next five years. Analysts also cited strong initial patient demand in Inlexzo, which launched in September.
During the company's latest earnings call, J & J CFO Joseph Wolk disclosed for the first time that Inlexzo's quarterly sales surpassed $30 million, a move the analysts called a "bullish indicator because JNJ does not typically comment on quarterly sales of products during initial launches. " Leerink's new price target of $265 per share, up from $252, is in line with the Club and implies over 15% upside. (Jim Cramer's Charitable Trust is long JNJ.
Analyst Views
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Financial markets are tracking the development closely as investors assess the likely impact.
