Pharmaceutical giant AbbVie (ABBV 1.06%) has been one of the market's hottest stocks, rising more than 50% over the past year. It should raise eyebrows, considering the S&P 500 is up just 13% in that time. Why has AbbVie done so well and is it too late to benefit from buying shares?
Fear not -- AbbVie's rise has been a long time coming, and it's something that could have the legs to continue. However, there are some important details you need to be aware of. Here's why AbbVie could keep delivering excellent returns to long-term investors.
The stock is soaring; what gives?
AbbVie sells Humira, the world's top-selling pharmaceutical drug, which generated $20 billion in sales in 2021. It's the crown jewel of AbbVie's business and accounts for roughly 36% of total revenue. Humira is obviously important, but the drug's patent, which blocks competitors from creating a similar product, expires next year.
Image source: Getty Images.
This has long been on investors' minds, going back to the fall of 2021 when I covered AbbVie's share-price struggles and pointed the finger at fears over looming competition for Humira as a primary reason investors had cooled on the stock.
But AbbVie's business has continued growing in the meantime, which has steadily made the stock's valuation less expensive. AbbVie's price-to-earnings ratio (P/E) fell to the 8 to 10 range, well below the stock's median P/E ratio of 21 over the past decade. A valuation can sometimes be like a coiled spring, and when something happens to "unleash" that spring, it can have a remarkably strong effect on the stock.
Unleashing AbbVie's coiled spring
By this "coiled spring" analogy, I mean that sometimes the market gets it wrong. Investors viewed the loss of Humira as a potentially company-ruining event; you can see the market's sentiment reflected in shares selling off to such a depressed valuation. But the market then said, "Wait a minute, it's not as bad as it looks." Once this realization occurred, investors realized what a bargain the stock was and flocked to buy shares. The more depressed the valuation, the sharper the reversion back up will be, which is probably why AbbVie's been on such a tear.
So what happened to suddenly make the market love AbbVie again? The market is irrational in the short term, and you can't always explain the timing of things. However, AbbVie's management has been steadily preparing for life after Humira's patent expiration, evidenced by numerous developments in the business.
The company's massive $63 billion acquisition of Allergan in 2020 diversified AbbVie by adding several new products to its portfolio, including cosmetic surgery brand Botox. More recently, AbbVie acquired Syndesi Therapeutics for up to $1 billion, depending on product milestones. The acquisition bolsters AbbVie's pipeline of neuroscience products.
Internally, AbbVie has also made progress; its up-and-coming products Skyrizi and Rinvoq totaled $4.5 billion in revenue in 2021, growing more than 80% year over year. These drugs treat some of the same conditions as Humira. Don't forget that AbbVie will still sell Humira; the loss of patent protection means generic brands will enter the market, but Humira has an established brand that doctors and patients trust.
Analyst estimates expect an initial 6% drop in revenue for AbbVie next year, and then for the company to begin growing again in 2024 and beyond. In this light, Humira's patent expiration doesn't seem like some existential crisis at all.
Is there room to run?
This initial drop in business means that profits could fall next year. Analysts are looking for 2022 earnings-per-share (EPS) of $14.14 but expect that to decline to $12.23 in 2023. Even if we use next year's (lower) EPS estimates, the stock's current valuation is still just over 13, still well below that median P/E of 21.
The likely drop in Humira sales could create a drag on profit growth for the next several years. The company has grown EPS by an 11.5% annual average rate over the past decade, but analyst projections for the next three to five years call for just 2.5% per year. It's reasonable that the stock would see its valuation on the market fall in response to this slowdown.
So if you're looking for a quick buck, AbbVie may not be your stock. Shares could, of course, keep running higher, but there may be some uncertainty until investors see how the company performs once Humira's patent expires next year. For long-term investors, AbbVie's a proven blue-chip winner with a growing pipeline and a management intent on building for its next growth phase. I see Humira as an opportunity to buy shares while the company sets itself up for the long term.
Justin Pope has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
FAQs
AbbVie IncStock , ABBV
AbbVie stock has received a consensus rating of buy. The average rating score is and is based on 31 buy ratings, 14 hold ratings, and 2 sell ratings.
What is the price target for ABBV 2023? ›
Abbvie Price prediction day by day
| Calendar date | Regular | Least possible price |
|---|
| 2023 July 20, Thursday | 141.886 | 120.6031 |
| 2023 July 21, Friday | 140.840 | 119.714 |
| 2023 July 22, Saturday | 141.410 | 120.1985 |
| 2023 July 23, Sunday | 141.898 | 120.6133 |
117 more rowsStock Price Forecast
The 23 analysts offering 12-month price forecasts for Abbvie Inc have a median target of 163.00, with a high estimate of 201.00 and a low estimate of 135.00. The median estimate represents a +19.42% increase from the last price of 136.49.
Where will ABBV stock be in 5 years? ›
What will Abbvie stock price be worth in five years (2028)? The ABBV ("ABBV" ) future stock price will be 262.460 USD .
How safe is AbbVie stock? ›
NYSE: ABBV
However, the pharmaceutical giant remains a safe stock to buy for several reasons. First, what AbbVie is going through isn't rare or unusual for drugmakers. Virtually every single pharma giant has had to deal with similar revenue-declining transition periods associated with patent cliffs at some point.
Should I buy or sell AbbVie? ›
Abbvie Stock Forecast FAQ
Out of 11 analysts, 5 (45.45%) are recommending ABBV as a Strong Buy, 2 (18.18%) are recommending ABBV as a Buy, 4 (36.36%) are recommending ABBV as a Hold, 0 (0%) are recommending ABBV as a Sell, and 0 (0%) are recommending ABBV as a Strong Sell.
What is AbbVie stock price prediction for 2025? ›
The Abbvie stock forecast for 2025 had the price at $259.018.
What is the 12 month target price for ABBV? ›
What is ABBV's average 12-month price target, according to analysts? Based on analyst ratings, AbbVie's 12-month average price target is $165.88.
What is AbbVie's long term forecast? ›
AbbVie is forecasted to grow earnings and revenue by 12.4% and 1.6% per annum respectively. EPS is expected to grow by 15.1%. Return on equity is forecast to be 107.2% in 3 years.
What is AbbVie fair value? ›
Enterprise Value is likely to drop to about 289.9 B in 2023. AbbVie Inc shows a prevailing Real Value of $141.17 per share. The current price of the firm is $145.11. At this time, the firm appears to be fairly valued.
...
4.9 B.
| Low | Target Price | High |
|---|
| 146.00 | 169.15 | 195.00 |
Historical daily share price chart and data for AbbVie since 2023 adjusted for splits. The latest closing stock price for AbbVie as of June 05, 2023 is 136.86. The all-time high AbbVie stock closing price was 166.98 on April 08, 2022.
Is AbbVie a spin off? ›
One of the most memorable Abbott moments under former CEO Miles White, was the company's AbbVie spinoff in 2012.
Is AbbVie a good stock to buy long term? ›
Summary. AbbVie is a quality BBB+ S&P credit rated healthcare stock with a 3.9% yield. It has 11 years of a rising dividend and an amazing 5-year dividend growth rate of 17.7%. Price valuations are shown from Morningstar, Value Line, CFRA, and Yahoo Finance analysts.
Why should I buy AbbVie stock? ›
The market-topping payout is sustainable
Income investors will be pleased to learn that AbbVie's 3.9% dividend yield is more than twice the S&P 500 index's 1.7% yield. Most importantly, the company's dividend seems to be viable moving forward. AbbVie's dividend payout ratio is expected to come in at around 54% in 2023.
What is AbbVie revenue forecast for 2023? ›
That helped AbbVie beat sales expectations with revenue of $12.23 billion, topping estimates of $12.17 billion. The company now expects 2023 adjusted earnings of $10.72 to $11.12 per share, raising both ends of the range by 10 cents.
Is AbbVie undervalued? ›
(NYSE:ABBV) Suggests It's 43% Undervalued.
Is AbbVie recession proof? ›
AbbVie (ABBV)
A pharmaceutical company, AbbVie (NYSE:ABBV) makes a strong case for recession-proof dividend stocks to buy. Basically, even under negative economic cycles, scientific research will push forward, seeking to address various human ailments.
Why did Buffett sell AbbVie stock? ›
He most likely bought AbbVie because he perceived that it was priced below its intrinsic value and then sold when he believed it was priced above that value. Although Warren Buffett is fond of long-term holdings, such short-term turnarounds are fairly common in classical value investing.
What is AbbVie best selling drug? ›
AbbVie's blockbuster drug Humira finally loses its 20-year, $200 billion monopoly. Humira, the injectable biologic treatment for rheumatoid arthritis, now faces its first competition from one of several copycat "biosimilar" drugs expected to come to market this year. Some patients spend $70,000 a year on Humira.
Who owns most shares of AbbVie? ›
Institutional investors hold a majority ownership of ABBV through the 71.34% of the outstanding shares that they control. This interest is also higher than at almost any other company in the Pharmaceuticals: Major industry.
These include Humira, Imbruvica and Viekira. By far, AbbVie's biggest sales generator is Humira. Doctors prescribe the drug to treat arthritis, psoriasis and Crohn's disease.
What month does AbbVie pay dividends? ›
(NYSE: ABBV) today declared a quarterly cash dividend of $1.48 per share. The cash dividend is payable May 15, 2023, to stockholders of record at the close of business on April 14, 2023. Since the company's inception in 2013, AbbVie has increased its dividend by more than 270 percent.
How much dividend does AbbVie pay per year? ›
ABBV pays a dividend of $1.48 per share. ABBV's annual dividend yield is 3.94%. When is AbbVie ex-dividend date? AbbVie's previous ex-dividend date was on Apr 12, 2023.
How many years has ABBV paid a dividend? ›
AbbVie has been paying dividends since 2013. ABBV has issued four quarterly dividends in the last twelve months. The annualized DPS has increased by 7% for the last year.
What is the target price for Abev? ›
Stock Price Target ABEV
| High | $5.00 |
|---|
| Median | $3.50 |
| Low | $2.70 |
| Average | $3.64 |
| Current Price | $2.99 |
AbbVie's index membership is Russell 1000, S&P 500 Health Care, Russell 3000, S&P 100, S&P 500, and Investing.com United States 500.
Is AbbVie's dividend safe? ›
Perhaps part of this confidence comes from AbbVie's ability to generate more than enough cash to cover its dividend payments. The company's cash payout ratio is currently about 45% -- where anything under 60% is generally considered good.
Is AbbVie a good company? ›
AbbVie Reviews FAQs
Is AbbVie a good company to work for? AbbVie has an overall rating of 3.9 out of 5, based on over 4,345 reviews left anonymously by employees. 75% of employees would recommend working at AbbVie to a friend and 71% have a positive outlook for the business.
Where does AbbVie rank? ›
AbbVie ranked #4 on FORTUNE's list of World's Best Workplaces™ 2021. We are proud to have been ranked #4 – a jump of 11 spots from 2020 – on FORTUNE's 2021 World's Best Workplaces list following the magazine's massive, data-led annual analysis of corporate culture at more than 10,000 companies around the globe.
What Is AbbVie Known For? AbbVie is best known for manufacturing Humira — a medication used to treat moderate-to-severe rheumatoid arthritis and Crohn's disease. AbbVie products include a wide range of drugs.
What is the highest priced stock in history? ›
Top Companies by Stock Price
The most expensive publicly traded share of all time is Warren Buffett's Berkshire Hathaway (BRK. A), which was trading at $458,675 per share, as of January 2022.
What was the highest target stock price? ›
The latest closing stock price for Target as of June 06, 2023 is 132.70.
- The all-time high Target stock closing price was 257.58 on November 16, 2021.
- The Target 52-week high stock price is 183.89, which is 38.6% above the current share price.
Current and historical gross margin, operating margin and net profit margin for AbbVie (ABBV) over the last 10 years. Profit margin can be defined as the percentage of revenue that a company retains as income after the deduction of expenses. AbbVie net profit margin as of March 31, 2023 is 13.37%.
Does Warren Buffett still own AbbVie stock? ›
Buffett owned shares of AbbVie (ABBV -1.13%) in Berkshire's portfolio not too long ago. He subsequently exited his positions in AbbVie and several other big pharma stocks. However, the legendary investor nonetheless still has a stake in AbbVie through NEAM.
What is the AbbVie controversy? ›
A lawsuit has been filed against pharmaceutical giant AbbVie over the high price tag on its best-selling drug Humira and a practice it allegedly engages in to help pharmacy benefit managers pocket more money on the medication.
Is AbbVie an aristocrat? ›
AbbVie began trading as an independent company in 2013, after it was spun off from fellow pharmaceutical Dividend Aristocrat, Abbott Laboratories (ABT).
Which pharma stock is best for long term? ›
Best Pharma Stocks in India
- Sun Pharmaceutical Industries Ltd. Sun Pharma is India's biggest drugmaker and has a market cap north of Rs 2 lakh crore. ...
- Divi's Laboratories Ltd. ...
- Dr Reddy's Laboratories Ltd. ...
- Cipla Ltd. ...
- Biocon Ltd. ...
- Apollo Hospitals. ...
- Growth plus value. ...
- High profit margin.
Top Pharma Stocks in India 2023
| S.No. | Company Name | Market Cap (Rs in Crores) |
|---|
| 1. | Sun Pharmaceutical Industries Ltd. | 2,39,250 |
| 3. | Dr Reddy's Laboratories Ltd. | 77,981 |
| 2. | Divi's Laboratories Ltd. | 76,715 |
| 4. | Cipla Ltd. | 72,301 |
1 more rowApr 19, 2023
best long term stocks
| S.No. | Name | CMP Rs. |
|---|
| 1. | SG Finserve | 587.10 |
| 2. | Ksolves India | 904.25 |
| 3. | Life Insurance | 597.75 |
| 4. | Dreamfolks Servi | 588.30 |
23 more rowsCompared to the current market price of 137.64 USD, Abbvie Inc is Overvalued by 6%.
What is the fair value of AbbVie stock? ›
As of today (2023-05-31), AbbVie's share price is $136.44. AbbVie's Peter Lynch fair value is $90.31. Therefore, AbbVie's Price to Peter Lynch Fair Value Ratio for today is 1.51.
