Almost $40 billion has been erased from Johnson & Johnson's market value, but JPMorgan says the selling is overdone

Markets Insider

• Johnson & Johnson plunged more than 9% Friday after Reuters reported the company has known "for decades" that some of its baby powder contained traces of asbestos.
• The selling has wiped out $38 billion of market cap.
• JPMorgan says the selling is overdone.
• Watch Johnson & Johnson trade live.

Johnson and Johnson shares were down more than 9% Friday after a Reuters report said the company has known "for decades" that some of its baby powder had contained traces of asbestos, but at least one Wall Street firm says the weakness is overdone.

"We note that all issues reported were previously disclosed as part of talc litigation discovery," a team of JPMorgan analysts led by Chris Schott wrote in a note to clients out Friday.

"As we think about the risk to JNJ here, on one hand, we believe it is highly unlikely the company's exposure to this talc issue will even come close to the ~$40bn in lost market cap today (for context, the largest historic drug liability ~$21bn for fen-phen). Along those lines, we see today's move as an over-reaction, especially from a longer-term perspective."

JPMorgan notes that this story isn't likely to go away anytime soon, and that shares could trade at lower mutiples for an "extended period of time."

Johnson & Johnson shares were down about 5% this year, including Friday's sell-off