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Johnson & Johnson stock falls after news of discontinuing product

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Johnson & Johnson is a US company recognized worldwide for its pharmaceutical and personal care products, mainly for babies. Products such as creams, soap, shampoo, and baby powder; and well-known brands such as Lubriderm, Listerine, Sundown, and Johnson’s Baby have led this company to success. 

Since 1894, Johnson & Johnson has been selling baby powder. They crush talc, a mineral, and this is how they obtain their famous product. Despite selling in large quantities, this product has received several criticisms because the mineral can cause severe inflammations and even lead to cancer on certain occasions.

Several sources also claim that the powder contains “traces of asbestos”, which can lead to an increased risk of “mesothelioma”, a type of lung cancer.

For these reasons, Johnson & Johnson faces around 38,000 lawsuits over substances found in talc. The company pointed out that the costs linked to the defense of these cases are close to 1 billion dollars.

Against this backdrop, the company recently unveiled that it will stop selling its baby powder in 2023. This announcement led the stock to drop 2.1% and close Friday’s session at $167.14. With this cost reduction, Johnson & Johnson will be able to use its funds in a different way, something that will further help the company’s development. 

Despite the legal problems and the recent dip in its stock, Wall Street specialists remain cautiously optimistic about Johnson & Johnson shares. The average price is $188.73 and has an upside potential of 12.9% from current levels.

The previous month, the company reported its second-quarter results for the year and results were better than expected with revenue of $24 billion, up 3% year-over-year. However, its sales and profit forecasts were lowered for the remainder of 2022 due to the inflation issue. 

“Our strong second-quarter results at Johnson & Johnson reflect the strength and resilience of our company’s market leadership amid macroeconomic challenges,” said the company’s CEO, Joaquin Duato.

The company recorded an increase in pharmaceutical sales of 6.7%, to 13.332 billion dollars. On the other hand, sales of Covid-19 vaccines doubled compared to last year, reaching 544 million dollars.

What do you think about Johnson & Johnson no longer selling baby powder? Would you invest in this company’s stock?

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