Morgan Stanley has moved Johnson & Johnson to an Overweight rating from Equal weight, signaling a more constructive view of the company based on what the firm describes as clear commercial momentum tied to recently launched and soon-to-launch drugs. The bank simultaneously raised its price target on the shares to $262 from $200. Shares were up 0.5% in premarket trading after the update.
In its note, Morgan Stanley said it now anticipates earnings will come in ahead of current expectations, driven by multiple product cycles. The bank indicated its internal estimates sit roughly 20% above consensus in aggregate.
J&J has already delivered strong share-price performance, increasing about 43% last year and outperforming both the S&P 500 and the broader drug sector. Morgan Stanley said that some of the uncertainty that had pressured the drug industry - related to changes in biopharma pricing agreements - has eased, helping the company and the sector trade with greater clarity.
Although the stock has partially re-rated, the bank emphasized that further upside could be achieved through earnings growth rather than additional valuation expansion. Morgan Stanley values J&J at roughly 19 times its 2026 earnings estimate and about 17 times its 2027 estimate. The bank noted those multiples still imply approximately a three-turn discount relative to the broader market.
A central pillar of Morgan Stanley's optimism is its assessment of J&J's product pipeline. The firm highlighted the company's commercial prospects in immunology and oncology, specifically calling out Tremfya and Icotyde in immunology; Tecvayli and Carvykti for multiple myeloma; and Rybrevant in lung cancer. After recent meetings with physicians, Morgan Stanley raised forecasts for several products, including Tremfya, Icotyde, Tecvayli and Darzalex.
Those upward revisions to product forecasts increase the bank's expectation for annual revenue by between $3 billion and $7 billion, measured against a revenue base of more than $100 billion. Morgan Stanley now models compound annual growth of roughly 5.5% for revenue and about 12% for earnings over the 2026 to 2030 period, which the firm classifies as placing J&J in a higher-growth grouping among large biopharma peers.
Morgan Stanley also acknowledged that J&J will face patent expiries on a timeline similar to its peers, but concluded the company's new product introductions are expected to largely offset those losses over the coming decade.
Implications for markets and sectors
- Healthcare and biopharma equities may see relative strength if product commercialization continues to exceed expectations.
- J&J's improved earnings trajectory could influence valuation comparisons across large-cap pharmaceutical peers.
- Investor focus may shift from valuation expansion to earnings delivery as the primary driver of further share gains.
Conclusion
Morgan Stanley's upgrade and higher price target reflect a reassessment of Johnson & Johnson's near-term commercial performance and medium-term growth trajectory based on product launches and recent physician feedback. The bank's models project stronger revenue and earnings growth versus the firm's prior view and place J&J among a relatively higher-growth cohort within large biopharma.