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The risk/reward for Kenvue (NYSE:KVUE), the consumer health company that was spun off from Johnson & Johnson (JNJ) earlier this year, skews to the upside, according to JPMorgan.
Kenvue (KVUE) shares have been weighed down in recent months, at least partly due to concerns about potential liability in a class action lawsuit alleging prenatal exposure to Tylenol may contribute to autism in children.
There will likely be more clarity on a “potential path forward” for the litigation sometime between mid-November and early-March, with a more targeted range of late-December to late-January, JPMorgan analyst Andrea Teixeira, who has an overweight rating and $26 price target on Kenvue (KVUE), wrote in a note on Wednesday.
The earlier time frame depends on whether Judge Denise Cote dispenses with a Daubert hearing and moves directly to a ruling on the Rule 702 motions, and the later time frame would happen if the judge held a Daubert hearing the week of December 4 and then took 30 to 90 days to issue a ruling.
“Net-net, we see asymmetric risk/reward to the upside, but acknowledge that KVUE shares are likely to trade sideways until investors have clearer visibility to the resolution or pathway forward of the pending acetaminophen multi-district litigation,” JPMorgan’s Teixeira wrote in the note. “Given that, Equity Derivatives Strategy recommends buying a Nov/Jan Calendar Call Spread, given the potential for a positive outcome after more clarity comes from the pending acetaminophen litigation.”
Investors may get more insight into the legal situation as there’s a teleconference on the case scheduled for 3 p.m. on Wednesday.
Despite the JPMorgan note, Kenvue (KVUE) shares fell 1.3% on Wednesday.
