Shares of Johnson & Johnson (JNJ -0.77%) climbed higher this morning and are trading up 2.2% as of 11 a.m. ET.
The healthcare giant received a thumbs-up from an analyst, who sees roughly 14% upside in Johnson & Johnson stock from yesterday's close.
Analyst David Risinger from healthcare-focused investment bank SVB Leerink gave Johnson & Johnson stock an outperform rating with a price target of $200 per share, according to TheFly.com.
Risinger sees two key reasons why J&J should outperform: consistent earnings growth and growth via mergers and acquisitions. Specifically, the analyst projects J&J's overall revenue excluding its consumer business will grow at a compound annual growth rate (CAGR) of low-single-digit percentages and its earnings at a CAGR of mid-single-digit percentages over the next five years.
Late last year, J&J announced plans to separate its consumer health business -- which includes global brand names like Neutrogena, Band-Aid, and Listerine -- into a new publicly traded company within the next 18 to 24 months. J&J wants to focus solely on healthcare through its two other segments -- pharmaceutical and medical devices.
Within these segments, Risinger is more bullish on medical devices and expects sales to grow mid-single-digit percentages over the next five years. In contrast, the analyst expects revenue from pharmaceuticals in 2025 to be only around $56 billion, or flat from 2022 projection, thanks to pressure.
For context, J&J's patent for Stelara -- a drug used to treat severe plaque psoriasis -- will expire in 2023 in the U.S. and 2024 in the European Union. Stelara is the company's largest product and accounted for 9.7% of its total revenues in fiscal 2021, which ended January 2, 2022.
There's no denying Stelara's patent expiry will hit J&J substantially, but there's a lot more to this company that has analysts and investors excited. For example, sales of J&J's cancer drug Darzalex -- its second-largest product -- is booming. J&J has several other drugs and a hugely impressive pipeline with multiple drugs in advanced states of approval. Meanwhile, its medical devices business is growing steadily and was also its best-performing segment in 2021 with nearly 18% growth in revenue.
J&J, a Dividend King, also recently joined the handful of companies that have increased dividends every year for six decades.