JNJ's Early 2026 Surge Highlights Execution Strength But Overlooks Persistent Risks

What happened

Johnson & Johnson stock has rallied 17% through February 2026, fueled by a 'triple threat' of high-growth oncology sales, a MedTech rebound, and a surprise earnings beat that defied new tariff pressures. This momentum aligns with the company's strategic pivot toward oncology and cardiovascular platforms, as detailed in recent SEC filings showing ex-Stelara Innovative Medicine growth in the low double digits. However, the DeepValue master report cautions that at $216.58, the stock already discounts mid-single-digit revenue growth and stable margins, leaving limited upside over the next 6-18 months. Key risks include unresolved talc litigation with rising case counts, drug pricing pressures from the IRA, and medium-term exclusivity losses for Darzalex, which could erode earnings visibility. Despite the positive headlines, the report maintains a 'WAIT' rating, advising investors to seek a pullback to around $190 or clearer legal resolution before increasing exposure.

Implication

The stock's recent surge reflects strong operational execution but may have overextended valuation, trading at 21x EV/EBITDA with net debt rising to $27.2 billion, compressing the balance-sheet cushion. Talc litigation remains a critical swing factor, with reserves cut to $3.8 billion but cases up 17%, posing downside risk if adverse rulings force significant accruals. Drug pricing concessions and tariff headwinds are expected to pressure margins, challenging the growth-through-cliffs thesis as Stelara erosion accelerates and Darzalex LOE approaches. In MedTech, competitive threats in pulsed field ablation and ongoing orthopedics restructuring limit segment upside, despite cardiovascular growth. Therefore, patience is warranted; monitor for ex-Stelara growth sustainability and talc developments, with entry opportunities likely on dips below $195.

Thesis delta

The new article confirms the positive momentum in oncology and MedTech already acknowledged in the DeepValue report, but it does not alter the core investment thesis. The report's 'WAIT' rating remains valid as valuation concerns persist and key risks—talc litigation, pricing pressures, and medium-term LOEs—are unchanged, emphasizing that investors should still await a better entry point or clearer legal outcomes.