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AbbVie, HSBC, and the $315 per bull case
HSBC analyst Rajesh Kumar’s bull case for AbbVie is based on the growing approved indications for Skyrizi and Rinvoq. These pending expanded use cases include the use of Rinvoq to treat vitiligo and the release of a more convenient subcutaneous induction option for Skyrizi to treat Crohn’s disease.
Kumar believes that these pending pipeline readouts will enable the company to raise peak sales guidance for both products, which could shift AbbVie’s expected earnings growth rate “from the low mid-single digits” to the “high mid-single digits,” a level of growth acceleration that will ly lead to a rerating for s.
Adjusting for the one-time impact of recent pipeline drug purchases, AbbVie trades at around 16 times forward earnings. This suggests that, as the growth catalyst plays out, Kumar believes that AbbVie could rerate to a forward price-to-earnings multiple in the high-teens to low-20s range. Better yet, while Kumar’s bull case focuses primarily on this catalyst, another factor could positively affect AbbVie’s performance in the coming years.
Alongside the prospect of label expansion for these two drugs, AbbVie is further pivoting into immunology, notably through its recent $10.9 billion acquisition of Apogee Therapeutics. This is the aforementioned pipeline deal that will temporarily affect earnings this year, but could drive earnings growth in the years ahead.
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NYSE: ABBV
AbbVie
Premium Feature
Moneyball Superscore
80/100
Today’s Change
(0.47%) $1.25
Current Price
$267.01
Key Data Points
Market Cap
$470BMarket cap calculated using publicly traded s outstanding only. Does not include unlisted, private, or dual-class non-traded s. Implied market cap may vary.
Day’s Range
$260.62 – $268.86
52wk Range
$190.75 – $269.39
Volume
1.6M
Avg Vol
5M
Gross Margin
71.42%
Dividend Yield
2.57%
Here’s another way AbbVie could surge in the long run
The “known unknown” regarding whether Skyrizi and Rinvoq sales could offset the loss of Humira’s patent exclusivity has been more or less resolved. Last quarter, Skyrizi generated $5.5 billion in sales, while Rinvoq generated $2.5 billion in sales. Considering that Humira generated just $756 million in sales last quarter, AbbVie’s new flagship products are generating 10 times as much revenue as its former legacy flagship drug.
Now, with label expansion for these two drugs, coupled with the further build-out of AbbVie’s pipeline, there is far less uncertainty around AbbVie s. Yet while all of this is a strong setup for a strong run in the years ahead, it may not play out exactly as Kumar envisioned in his recent research note. While AbbVie’s s could surge further on stronger-than-expected long-term sales growth, note that the stock, at around 16 times forward earnings, already trades at a premium to the low- to mid-teen valuations of many other pharmaceutical stocks.
In other words, it would be easier to see AbbVie rerated from 12 to 16 times earnings on the expanded label, but not necessarily a rerating from 16 to 20 times forward earnings. That said, even if price appreciation doesn’t arrive as rapidly as Kumar anticipates, other strengths could pave the way for strong long-term returns for s.
Besides appreciation potential, don’t forget AbbVie’s status as one of the blue chip dividend stocks. With a 2.6% forward dividend yield, AbbVie has raised its dividend for 13 consecutive years, ever since its spinoff from Abbott Laboratories, itself one of the Dividend Kings, in 2013. Dividend Kings are stocks that have increased their dividend payouts for at least 50 consecutive years.
Over the past three years, dividend growth has averaged between 5% and 6%. Considering these additional strengths, keep in mind that AbbVie s could still perform well, even if Kumar’s bull case doesn’t go off without a hitch.
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About the Author
Thomas Niel is a contributing Analyst at The Motley Fool, covering publicly traded companies in the consumer goods and technology sectors. Prior to the Motley Fool, Thomas was a contributing Analyst for several online investing publications, including InvestorPlace, Seeking Alpha, and TipRanks. He also has past career experience in the accounting and government contracting industries. He holds a B.B.A. in Accounting from Marymount University. Thomas won his school’s geography bee in the fifth grade, but retired from the professional geography bee circuit shortly thereafter.
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AbbVie
NYSE: ABBV
$266.98
(+0.46%)+$1.22
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