Kenvue stock’s recent decline provides a buying opportunity, some analysts say.
Dreamstime
Kenvue
shares have fallen recently as investors have become concerned about the company’s exposure to lawsuits over its pain reliever Tylenol.
But some Wall Street analysts say the market’s reaction is exaggerated and see a solid buying opportunity for the consumer health company.
Kenvue
(ticker: KVUE), which was recently spun off from
Johnson & Johnson
(JNJ), faces lawsuits claiming Tylenol caused neurological disorders in children whose mothers took the medication while pregnant. They say the company is at fault for not including a warning about the possible risks on the bottle’s label.
Kenvue
has said that acetaminophen, the active ingredient in Tylenol, is “one of the most studied medications in history,” and U.S. health regulators and medical organizations agree it is safe.
The stock was down 2.7% in August, and J.P. Morgan analyst Andrea Teixeira said in a Friday note the decline provides a buying opportunity. Teixeira rates the stock as Overweight with a $29 price target.
“We think the negative stock reaction (sell now and ask questions later) was exaggerated even considering a potential liability,” Teixeira wrote. She added the stock’s valuation supports her beliefs that this is a good time to buy for medium and long-term investors.
Kenvue currently trades at 16.5 times forward earnings, which is below the average of 18.7 times.
Deutsche Bank analyst Steve Powers shares a similar sentiment, and upgraded the stock to Buy from Hold with a $27 price target on Sunday. He wrote in a research note the legal risks are priced in, and the stock is currently oversold.
“KVUE is a high-quality company (and now liquid stock, with membership in the
S&P 500
),” Powers said. “It has a portfolio of leading brands, a clean balance sheet, and ample industry consolidation opportunities.”
Shares on Kenvue had risen 3.9% Monday to $22.13.
Write to Angela Palumbo at [email protected]
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