Previously, we looked at how the stocks of five of the 10 biggest members of the pharmaceutical industry--as measured by market cap-- might fare in 2020. Will the companies whose shares enjoyed nice gains last year maintain their momentum? Or are the best investing opportunities in those drug companies who trailed the field?
Coming in at number five is Pfizer Inc. (PFE, Financial). The New York-based company’s shares tumbled nearly 8% in 2019 to nearly $39. The nine analysts offering 12-month price forecasts for Pfizer have a median target of $41, with a high estimate of $53 and a low guess of $37, according to CNN Business. For the past year, the company has been rated a hold. Is Pfizer planning to make a run at Bristol-Myers Squibb (BMY, Financial)? An article in Pharma Boardroom things there’s a good chance they will, paying a premium of 30%.
At number four, Roche AG (RHHBY, Financial) shareholders have to be pleased that the value of their investment in the Swiss-based company soared more than 30% and the stock now trades at its 52-week high of about $41. Roche might have difficulty duplicating that performance because, as pointed out in a GuruFocus article on Dec. 27, the company is losing patent protection this year on three of its key drugs that generated $10 billion in U.S. sales. Analysts might think the company is running out of steam and could see a decline in its share price this year, with 21 investment professionals offering a price target where the stock is now, according to CNN. They assigned a high estimate of just over $48 and about $28 on the downside. However, the company is still rated a buy.
Number three Merck & Co. Inc.'s (MRK, Financial) shares gained more than 20% last year, and at just under $88 are near the company’s 52-week high. Nuveen analyst Saira Malik is high on Merck. Fortune recently reported that she likes the company’s solid revenue growth and strong pipeline. She thinks Merck’s Keytruda, which is used to treat certain cancers, could be the best-selling medication globally in five years, suggesting it could contribute $22 billion to the company's top line in 2024. Ten analysts have Merck as a moderate buy, with an average price target of $97 and a high forecast of $105 and a low of $89. A Pharma Boardroom article thinks Merck has its sights on Eli Lilly (LLY, Financial).
In second place, Novartis AG's (NVS, Financial) shares were up about $20 in 2019 and are now near $95, close to their all-time high. Since mid-October, the stock has been on the upswing, with only a few minor hiccups along the way. CNN Business reports that the 21 analysts offering 12-month price forecasts have a median target of $99, with a high estimate of nearly $109 and about $81 at the low end. The shares are rated a buy. The company raised its forecast three times in 2019, and continued boosts in its financial picture this year could send the shares higher. In early October, I reported that Novartis received the Food and Drug Administration's approval for a potential blockbuster, Beovu. The medication is used to treat wet age-related macular degeneration, a condition expected to affect more than 1.75 million people in the U.S. this year.
Johnson & Johnson (JNJ) sits atop the pharma leader board with a market cap of nearly $380 billion. The stock was somewhat choppy in 2019, but ended the year on a high note, hitting nearly $146 the day before New Year’s. That gave shareholders a gain of more than 14% for the year. The stock got a rousing endorsement in an article in U.S. News, which named the company one of the top health care stocks to buy in 2020 given its broad diversification, steady growth, stellar record of dividend payments and its recession-proof business. The company was also tabbed as one of hedge funds’ 25 stocks to buy now, according to an article in Kiplinger.
The 16 analysts offering 12-month price forecasts for Johnson & Johnson have a median target of $155, with a high estimate of $173 and a low estimate of $129. The stock is rated a buy.
Disclosure: The author has positions in Eli Lilly, Bristol-Myers Squibb and Johnson & Johnson.
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