Despite ongoing legal battles related to its talc products, Johnson & Johnson (NYSE:JNJ) stock has climbed over 23% year-to-date.
CNBC’s Jim Cramer on Thursday attributed the performance to investor confidence in Johnson & Johnson’s pharma strength and a shift in its legal approach, signaling that Wall Street may be moving past its longstanding concerns.
For years, Johnson & Johnson’s stock suffered from lawsuits, but Cramer noted that the company’s recent decision to fight cases in court rather than pursue sweeping bankruptcy settlements is reshaping perceptions.
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In April, a U.S. bankruptcy court in Texas rejected Johnson & Johnson’s subsidiary Red River Talc’s request to approve its prepackaged bankruptcy plan. The company said the plan included one of the largest settlements in mass tort bankruptcy history and was backed by most claimants.
While the legal disputes are far from settled, Cramer says the change in strategy and a focus on its business fundamentals have bolstered the stock.
“The plaintiff’s lawyers pursuing these cases have overplayed their hand,” Cramer told CNBC, suggesting that investors believe Johnson & Johnson can withstand the challenges.
Cramer also highlighted that Johnson & Johnson’s resilience comes from its diverse operations. It is not solely dependent on its pharmaceutical arm, which faces hurdles like a patent cliff for its key drug, Stelara, used to treat autoimmune diseases. Still, other oncology treatments are helping maintain their revenue stream.
A significant factor supporting the company’s growth is its robust medical device segment. Cramer pointed out that areas such as cardiovascular care, robotic surgery, and neurovascular technology are providing consistent performance. These segments, along with a strong pharmaceutical portfolio, offer steady revenue, softening the impact of broader industry headwinds.
Since spinning off its over-the-counter business two years ago, Johnson & Johnson’s pharmaceutical division has remained healthy, according to Cramer. While challenges remain, the company’s ability to balance risks with innovation and diversified revenue streams is attracting investors.
“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,” Cramer said on Thursday.
In March, Johnson & Johnson announced plans to invest more than $55 billion in the U.S. over the next four years.
This initiative, designed to strengthen American manufacturing, R&D, and technological advancements, represents a 25% rise from the previous four-year funding levels.
Price Action: JNJ stock is trading higher by 0.10% to $178.67 at last check Friday.
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