Underperforming Healthcare Stocks vs S&P 500: A Notable Disappointment for These 5 Companies
In recent data and analysis from mid-2025, healthcare stocks have been underperforming the wider stock market, including major benchmarks like the S&P 500 and the Nasdaq 100. The Morningstar US Healthcare Index rose only 0.25% year to date, compared to a 5.89% gain for the broader Morningstar US Market Index.
### Performance Overview
Key healthcare companies such as Sarepta Therapeutics and UnitedHealth Group experienced steep declines of 73.2% and 40.0%, respectively, in the second quarter of 2025, dragging down sector performance.
### Potential Factors Contributing to Underperformance
1. **Company-Specific Issues and Sector Challenges** - Several large healthcare firms have faced operational challenges. For instance, UnitedHealth Group saw a 40% tumble partly due to market concerns about its growth prospects despite trading at a discount to fair value. - CVS Health faced leadership changes and withdrew its 2024 guidance, creating uncertainty and dampening investor confidence.
2. **Biotech Volatility** - Biotechnology companies like Sarepta Therapeutics showed extreme volatility with share prices dropping over 70% in a quarter, reflecting high uncertainty and risk in drug development pipelines.
3. **Market Rotation and Sector Cyclicality** - Healthcare is generally considered a defensive sector, often holding up better in downturns but underperforming during strong bull markets where growth sectors like technology dominate.
4. **Valuation and Uncertainty Factors** - Many healthcare stocks trade below their fair value estimates, indicating market skepticism about near-term growth prospects or risks related to regulatory, reimbursement, or R&D outcomes.
### Notable Developments Among Healthcare Companies
- Amgen hit a peak of just above $330 in early March but never made it back to the high following a tank in early April. Amgen is a component of the Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100. - Eli Lilly recently acquired Verve Therapeutics, a Boston firm working on cardiovascular treatments. Eli Lilly, a drug maker with a focus on cancer, immunology, diabetes, and obesity, among other areas, has a market cap of $732.48 billion. - Johnson & Johnson's stock reached a peak in early March at $168, but has not recovered to that level following the early April sell-off. Johnson & Johnson has a market cap of $373.59 billion and pays a dividend of 3.31%. - AbbVie recently purchased biotech firm Capstan for $2.1 billion and pays a 3.47% dividend, with a market cap of $157.52 billion.
### Moving Averages and Current Trends
- As of mid-December 2024, the 50-day moving average of the ETF crossed below the 200-day moving average, and the 200-day moving average of the ETF is trending downward. - Today's close of AbbVie's stock is just above the 50-day and 200-day moving averages, while the price of Amgen is slightly above a down-trending 200-day moving average. - Johnson & Johnson's stock is trading above both the 50-day and 200-day moving averages.
### Analyst Opinions and Target Prices
- Cantor Fitzgerald initiated coverage with an "overweight" tag, price targeted for $210, for AbbVie, while Citigroup downgraded their opinion from "buy" to "neutral" with a price target of $205.
In the stark contrast seen in the finance world of mid-2025, healthcare stocks, including big names like Johnson & Johnson and AbbVie, are underperforming the wider market. Amidst this trend, some analysts like Cantor Fitzgerald maintain an optimistic outlook for AbbVie, setting a target price of $210. On the other hand, investors exploring the sector of investing may find dividend-paying giants such as Johnson & Johnson, offering a return of 3.31%, appealing despite the broader underperformance.
