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Kenvue sold 172.8 million shares in the initial public offering (IPO), raising $3.8 billion and valuing the healthcare company at about $41B. Johnson & Johnson (NYSE:JNJ) initially planned to sell 151M shares but changed plans due to a higher-than-expected interest. The pharma giant owns an 89.6% stake in Kenvua after the IPO and has 90.9% voting power.
Kenvue shares rallied in the meantime to add an additional $9B to its market cap. The “rich” valuation is the key reason why analysts are mostly cautious on the stock, in addition to JNJ’s intention to sell the majority stake in the business.
“We believe that the stock could be pressured by such a meaningful liquidity event if and when it were to occur. We expect this risk to be an overhang on the stock until it has passed,” said Goldman Sachs analysts, who initiated a research coverage with a Neutral rating and a $29 per share price target.
BofA analysts are more positive as they initiated coverage with a Buy rating and a $30 per share price target. Still, the analysts also see JNJ’s equity ownership “as a potential overhang on the stock’s valuation.”
“Kenvue is the world’s largest pure-play consumer health company by revenue, at nearly $15bn in 2022. Kenvue holds a portfolio of best-in-class brands built over the last 135 years, including Tylenol, Neutrogena, Listerine, Johnson’s, Band-Aid, Aveeno, Zyrtec, and Nicorette,” they wrote in a note.
At least 8 sell-side analysts launched research coverage on Kenvue so far with only 3 of them being Buy-rated.
KVUE shares are up 1.8% in premarket Tuesday.
