Third Point Trims Stake in Kenvue Amid Stock Underperformance

Dan Loeb’s Third Point Capital has scaled back its position in Kenvue Inc. (NYSE: KVUE), the consumer health giant spun off from Pfizer and GSK, according to recent SEC filings and reporting by the Financial Times. The firm’s decision to reduce its stake—from 3.6% to 2.6%—reflects growing investor caution toward the stock, which has languished below its $23 IPO price since late 2023. For Loeb, a vocal advocate for activist investing, the move underscores a recalibration of expectations for Kenvue’s near-term trajectory.

Kenvue: A Brand-Driven Giant in Consumer Health

Kenvue, home to over 11 billion-dollar brands like Tylenol, Neutrogena, and Listerine, is the world’s largest pure-play consumer health company by revenue. With operations spanning 165+ countries, it commands a dominant position in categories ranging from pain management to skincare. Analysts at Bank of America and Jefferies have praised its strategic board appointments and operational improvements, including margin expansion and brand reinvestment. Yet the stock’s underperformance has tested even its most ardent supporters.

Third Point’s Investment Journey: From Bullish to Cautious

Third Point initially invested $200 million in Kenvue at its IPO, signaling confidence in its long-term prospects. However, the firm sold 1.2 million shares as part of a secondary offering, reducing its stake. This decision aligns with Loeb’s hands-on, performance-driven approach, which prioritizes agility in volatile markets. The sale occurred amid Kenvue’s stock trading at a 26% discount to its IPO price, with shares hovering around $17—far below the $25 price target set by Jefferies.

The Financial Times noted that Third Point’s trimming of its position highlights near-term skepticism, even as the firm retains a long-term view on the consumer health sector. This contrasts with the company’s strong dividend yield of 3.88% and its upcoming Q1 2025 earnings report on May 8, which could re-ignite investor optimism.

Market Context: A Sector in Flux

The global cosmetics market is booming, projected to grow at a 6.1% CAGR through 2030, driven by demand for natural/organic products and e-commerce adoption. However, Kenvue faces headwinds:
- Trade Policy Risks: U.S. tariffs on Korean beauty imports (K-beauty) could pressure margins as Kenvue competes with cheaper, imported alternatives.
- Competitor Aggression: Rivals like L’Oréal and Procter & Gamble are ramping up innovation, squeezing Kenvue’s premium positioning.

Yet Kenvue’s diversified portfolio—spanning essential health (baby care, oral care) and self-care (pain management)—offers resilience. The company’s 23.49 P/E ratio (as of May 2024) reflects moderate valuation, with analysts like Citi seeing it as undervalued relative to growth prospects.

Data-Driven Analysis

The chart would show KVUE’s stock declining from $23 to ~$17, underscoring the underperformance that prompted Third Point’s stake reduction. Meanwhile, its dividend yield of 3.88% (vs. a 10-year Treasury yield of ~4%) positions it as a defensive play in volatile markets.

Conclusion: A Strategic Triage, Not a Write-Off

Third Point’s partial exit from Kenvue should be viewed as a tactical adjustment rather than a rejection of its long-term value. Key data points support this:
- Analyst Consensus: 7 of 10 analysts rate Kenvue a “Buy,” with a $25 average price target (up 47% from current levels).
- Margin Improvements: Operating income margins rose in 2024, signaling cost-control success.
- Catalysts Ahead: The May 8 earnings report could clarify execution on innovation and margin goals.

While Loeb’s caution is understandable given the stock’s slump, Kenvue’s $39.5 billion market cap and fortress-like brand equity remain compelling. For investors willing to look past short-term volatility, Kenvue’s dividend yield, geographic diversification, and secular growth drivers in health and beauty make it a defensive, multi-year opportunity. The question remains: Can Kenvue’s upcoming results and strategic moves convince skeptics like Third Point to reconsider its stake? The answer lies in execution—and the next earnings call.