Johnson & Johnson (NYSE:JNJ) shares have been retained with a Buy rating by S&P Capital IQ analyst Jeffrey Loo. Though the company will gain over $2 billion sales from the acquisition of Actelion and benefit 35 – 40 cents a share in earnings in the first full year, Loo thinks that the acquisition cost carried a significant premium of about 36X consensus EPS estimate of 2017.
The brokerage pointed out that Johnson & Johnson agreed to buy Actelion Pharmaceuticals for $30 billion or $280 a share. The American firm will retain the Swiss firm’s commercially-marketed drugs, especially to treat hypertension apart from late stage compounds.
“Actelion’s discovery stage operations will be spun-off into a separate company with JNJ owning 16%, with an option to acquire another 16%,” the analyst told in his research note to his clients.
The analyst has a price target of $140 on Johnson & Johnson shares implying that the stock presents more than 20 percent upside potentials from the current levels.