As the world’s largest and most diverse healthcare firm, Johnson & Johnson is considered by many to be a core stock to own. Theoretically, we agree: J&J has one of the widest economic moats in healthcare, thanks to its intellectual property and switching costs, and we expect steady growth ahead, with no big patent exposure for the next several years. In fact, we just raised our fair value estimate for J&J stock to USD 190 per share from USD 182. Yet Morningstar Chief US Market Strategist Dave Sekera argues in this week’s episode of The Morning Filter podcast that investors should consider taking at least some profits in the stock after its recent runup: This overvalued stock currently trades 19% above our fair value estimate (all returns in this article are measured on a US dollar basis). J&J may be a core stock to own, but not at today’s price. Keep it on a watchlist instead.
Johnson & Johnson maintains a diverse revenue base, a developing research pipeline, and exceptional cash flow generation. Contributing close to two-thirds of total revenue, the innovative medicine division boasts several industry-leading drugs. The medical technology group brings in one-third of sales, with strong positions in many areas, including electrophysiology, vision, and surgery markets. These multiple businesses generate substantial returns on invested capital, which look likely to remain in the midteens or even approach 20%, well above our estimated 7.2% cost of capital. Strong cash generation has enabled the company to increase its dividend for over 60 years, and we expect this to continue.
Key Morningstar Metrics for J&J
- : USD 190Fair Value Estimate
- : 2 StarsStar Rating
- : WideEconomic Moat Rating
- : LowUncertainty Rating
Economic Moat Rating
We believe Johnson & Johnson has one of the widest moats in the healthcare sector, supported by intellectual property in the drug group as well as intellectual property and, to a lesser extent, switching costs in the device segment. The company’s diverse revenue base, strong pipeline, and robust cash flow generation create a very wide economic moat. An extensive salesforce makes J&J a powerful candidate for a smaller biotechnology company looking to partner on a new drug, which strengthens J&J’s ability to bring new products to market.
Read more about Johnson & Johnson’s moat rating.
Fair Value Estimate for J&J Stock
Our USD 190 fair value estimate reflects our increased confidence in the launch of new products like Inlexzo (bladder cancer, USD 3 billion peak) and Icotyde (immunology, USD 7 billion peak), as well as share gains for immunology drug Tremfya (USD 14 billion peak). We expect mid-single-digit top- and bottom-line growth over the next five years, as the strength of new pipeline drugs should offset some patent losses in the pharmaceutical division. We expect fairly flat operating margins over the next several years as cost-containment efforts across the company help offset margin pressure from the loss of patent protection on several high-margin drugs, including Stelara.
Read more about Johnson & Johnson’s fair value estimate.
Risk and Uncertainty
Johnson & Johnson needs to overcome several legal roadblocks, including remaining litigation surrounding several products, one being talcum powder. The litigation could result in major settlements and could damage the company’s sterling reputation. Over the longer term, J&J faces typical healthcare risks such as reduced pricing power with governments and pharmacy benefit managers, regulatory delays, and nonapprovals as well as increasingly aggressive generic competition for small-molecule drugs and biologics.
Read more about Johnson & Johnson’s risk and uncertainty.
J&J Bulls Say
- J&J’s strong position in oncology and next-generation immunology product Tremfya create a foundation of innovative drugs.
- Diverse healthcare segments help insulate J&J from downturns in the overall economy, offering a defensive growth opportunity with a steady and likely growing dividend.
- Several of J&J’s key next-generation pipeline drugs are specialty drugs that tend to carry strong pricing power as well as lower regulatory hurdles for approval.
J&J Bears Say
- J&J’s late-stage drug pipeline could face significant competitive threats, as oncology and immunology remain popular areas for biopharma investment.
- Biosimilar competition to Stelara is rapidly eroding sales of the drug, putting pressure on the rest of the portfolio to compensate.
- J&J’s orthopedics segment is struggling to maintain share against more focused players like Stryker and Zimmer Biomet, and the economics of the separation are still up in the air.
This article was compiled by Susan Dziubinski and Sylvia Hauser. Data as of April 21, 2026, close unless otherwise noted.
