Kenvue’s Plunge: Value Play or Value Trap?

According to Forbes, Kenvue stock has declined significantly, trading around $15 per share—more than 65% below its 2023 highs—due to legal uncertainties, management changes, and slowing sales growth. The company faces lawsuits related to talc products and Tylenol safety concerns while maintaining strong fundamentals including a robust brand portfolio and over $1.6 billion in annual free cash flow. This divergence between operational strength and market sentiment raises important questions about the company’s investment potential.

Understanding the Corporate Spin-off Context

Kenvue represents one of the most significant corporate spin-offs in recent consumer health history, separating from pharmaceutical giant Johnson & Johnson in 2023. Unlike typical spin-offs where smaller divisions gain independence, Kenvue inherited some of J&J’s most recognizable consumer brands including Tylenol, Neutrogena, and Listerine. What makes this separation particularly complex is the ongoing legal entanglement—Kenvue remains named alongside its former parent in talc-related litigation, creating a unique situation where the spun-off entity didn’t fully escape the legal liabilities of its corporate predecessor. This structural complexity adds layers of risk that typical spin-offs don’t face.

Critical Analysis: Beyond the Headline Risks

While Forbes highlighted the obvious legal and management challenges, several deeper concerns deserve attention. The timing of CEO Thibaut Mongon’s departure during a critical post-spin-off stabilization phase suggests deeper operational issues than mere “strategic review.” More troubling is the potential for lawsuit contagion—if talc litigation expands or the unverified Tylenol safety concerns gain traction, Kenvue could face the type of multi-front legal battles that have crippled other consumer health companies. The company’s Tylenol brand specifically represents both a strength and vulnerability—as one of the most trusted pain relievers, any sustained reputational damage could permanently impair pricing power across Kenvue’s entire portfolio.

Industry Impact and Competitive Positioning

Kenvue’s struggles reflect broader challenges in the consumer health sector, where established brands face increasing pressure from private label competitors and regulatory scrutiny. The company’s corporate structure as a pure-play consumer health business initially seemed advantageous, but the current environment reveals vulnerabilities. Unlike diversified competitors like Procter & Gamble that can offset healthcare segment weakness with other product categories, Kenvue lacks this diversification buffer. Meanwhile, the valuation discount to competitors like Haleon may not fully account for Kenvue’s unique legal overhang and leadership instability, suggesting the market is pricing in risks that go beyond normal competitive pressures.

Realistic Outlook and Investment Considerations

The path forward for Kenvue depends heavily on three factors: legal resolution, leadership stabilization, and portfolio optimization. While the company’s strong cash flow provides financial flexibility, investors should recognize that legal resolutions typically take years, not quarters. The new CEO will need to articulate a clear strategy for margin improvement and potentially divesting underperforming brands—a challenging task amid ongoing litigation distractions. For patient investors, the current valuation may eventually prove attractive, but the near-term reality suggests continued volatility as the market digests legal developments and assesses new leadership’s capabilities. The true test will be whether Kenvue can demonstrate that its operational strengths can overcome the substantial sentiment and legal challenges it currently faces.