Johnson & Johnson (JNJ): What Made this Healthcare Giant Get a Positive Analyst Outlook in Q1?

We recently compiled a list of the 10 Best Healthcare Stocks to Buy According to Hedge Funds. In this article, we are going to take a look at where Johnson & Johnson (NYSE:JNJ) stands against the other healthcare stocks. You can also check out the 20 Most Valuable Healthcare Companies in the World here.

Healthcare stocks are often considered a defensive investment during times of economic uncertainty. This is because people typically do not cut back on essential healthcare services or prescription drug purchases, even during economic downturns. According to the Centers for Medicare and Medicaid Services (CMS), expenditure on healthcare within the United States reached an estimated $4.8 trillion in 2023 while projections for 2027-32 suggest that national care spending will grow at an average rate of 5.6%.

A report by McKinsey also predicts that the healthcare industry is expected to see significant profit growth, with the overall profit pool reaching $819 billion by 2027, up from $583 billion in 2022. As we progress through 2024, there is a growing sense of optimism surrounding the healthcare sector. BlackRock's 2024 outlook for healthcare suggests that investors can anticipate a "favorable risk-reward environment" in the sector this year. The healthcare sector's underperformance in the previous year has created an appealing entry point for investors seeking to invest in the sector in 2024. There are several key trends behind this favorable climate in 2024 and beyond.

Firstly, the healthcare market is undergoing a patient-centered revolution fueled by technology. Telehealth or telemedicine, a solution driven by the pandemic, is now entering the mainstream due to its convenience and accessibility. The global telemedicine market, valued at $60.15 billion in 2023, is expected to keep growing at a steady pace for the next few years. This trend aligns with a broader shift towards personalized care. Advancements in genomics are paving the way for precision medicine, which is expected to be a $50.2 billion market by 2028. Precision medicine personalizes treatments based on the patient’s genetic makeup, leading to potentially more effective interventions.

The AI revolution is also impacting the healthcare sector. According to a report by Deloitte, in 2019 and 2022, investor confidence in AI for healthcare was high, with around $31.5 billion poured into equity funding. In the US alone, wider adoption could generate annual savings of up to $360 billion, roughly 10% of the country's healthcare spending, within the next five years.

Another key trend is the rise of remote patient monitoring (RPM). This technology allows healthcare providers to collect patients' health data remotely and intervene early if there are any concerning changes. The global RPM market, valued at $71.9 billion in 2023, is expected to observe further growth. Wearable devices and other technologies enabling RPM are likely to see continued adoption through 2028.

Our Methodology

To shortlist the 10 best healthcare stocks to buy according to hedge funds, we conducted an analysis of our database of 919 hedge funds as of Q1 2024. From this dataset, we selected the best healthcare stocks based on the hedge fund sentiment. The top healthcare stocks have been ranked in ascending order of the number of hedge funds holding a stake in them as of the first quarter of the year. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).

A smiling baby with an array of baby care products in the foreground.

Johnson & Johnson (NYSE:JNJ)

Number of Hedge Fund Holders: 80

Johnson & Johnson (NYSE:JNJ) is a global healthcare giant that develops, manufactures, and sells a wide range of medical products. Through its Innovative Medicine segment, the company offers prescription drugs across various therapeutic areas.

In Q1 2024, Johnson & Johnson (NYSE: JNJ) reported positive growth, achieving sales of $21.4 billion, marking a 2.3% increase year-over-year. The company also saw net earnings rise significantly to $5.3 billion, compared to a loss in the corresponding period of 2023. Meanwhile, the EPS was recorded at $2.71, higher than the estimate of $2.65. The company has surpassed EPS estimates in the last 4 quarters.

Due to its strong operational performance, Johnson & Johnson (NYSE:JNJ) has a positive analyst outlook with a "Moderate Buy" rating and an average 12-month price target of $175.8, suggesting a potential upside of over 19%.

At the end of Q1 2024, 80 hedge funds reported owning a stake in Johnson & Johnson (NYSE:JNJ). Fisher Asset Management was the leading hedge fund investor in the company, with a stake worth over $1 billion.

Overall JNJ ranks 7th on our list of the best healthcare stocks to buy. You can visit 10 Best Healthcare Stocks to Buy According to Hedge Funds to see the other healthcare stocks that are on hedge funds’ radar. While we acknowledge the potential of JNJ as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than JNJ but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

 

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Disclosure: None. This article is originally published at Insider Monkey.