2023-10-11 06:00:00 ET
Kenvue (NYSE: KVUE) stock price crashed to a record low as the cost of living crisis continued. The shares collapsed to a low of $19.45, ~28% below the highest level this year, giving it a market cap of over $37 billion.
Good company in a challenging environment
Kenvue is a leading company in the consumer health industry that sells some of the most popular brands like Neutrogena, Johnsons, Band Aid, and Tylenol. It is a global company that sells its products around the world.
Kenvue, like other companies in the industry, is going through a challenging environment as its growth slows and the cost of living crisis continues. Inflation in most of its target markets remains sharply higher than where it was before the pandemic.
As a result, consumers are being selective about the discretionary products in its portfolio like those in face, hair, and body. At the same time, the strong dollar is hurting its international business since it reports in USD.
The most recent results showed that the company’s net sales rose by 5.4% YoY in the second quarter, helped by its pricing growth. Its volume was a bit flat during the quarter, signaling that customers were watching their budgets.
Skin, Health, and Beauty business had an organic growth of 3.4% while essential health had 3.8%. Its gross margins narrowed to 57.5% as inflationary pressures continued while forex headwinds dragged the EBITDA margins to 24.5%.
Kenvue is also facing other challenges. For example, it is facing a class action lawsuit alleging that its cold product does not work as advertised. The product in question is Sudafed and Benadryl.
It is also facing a lawsuit about Tylenol, its painkiller that is alleged to cause cancer. It is unclear whether the company will win or lose these lawsuits. In a recent note, an analyst at Bank of America said :
“The FDA’s response suggests Kenvue is unlikely to see material damages as there is no determination of causality between in utero exposure of acetaminophen and ASD/ADHD.”
Kenvue stock price analysis
The 4H chart shows that the Kenvue share price has been in a downward trend after it went public a few months ago. In addition to the challenges mentioned above, the company has seen strong selling pressure by Johnson & Johnson (NYSE: JNJ).
The stock has formed a descending channel shown in green and is now at its lower side. It remains below the 25-period and 50-period moving averages while the Relative Strength Index (RSI) has remained below 50.
Therefore, the short-term outlook for the stock is bearish. However, in the long term, the shares will likely bounce back because of its strong market share, well-known brands, and the cyclical nature of its business.
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