I am neutral on AbbVie (ABBV) as it has a very strong moat and Wall Street analysts are generally bullish on it, but its price target and valuation multiples imply that it is not particularly cheap at the moment.
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AbbVie was founded in 2013 with its headquarters in Illinois, as a biopharmaceutical company. AbbVie was formed to separate the research-based pharmaceutical manufacturing company from Abbott Laboratories.
The company has acquired several other firms, such as ImmuVen, and has also entered into global collaborations with some, including Infinity Pharmaceuticals.
According to a 2020 report, AbbVie had approximately 47,000 employees with its operations running in about 70 countries in five different regions.
Although the company was established less than a decade ago, it has developed strong partnerships in the biopharmaceutical industry.
Strengths
AbbVie has a strong global footprint and an even more robust team of employees spread across several nations. The company has developed several manufacturing facilities in North America and Europe, bringing its manufacturing capabilities higher than most competitors.
With a strong workforce, diversified portfolio, and expansions into several continents and countries, AbbVie can marginally grow in the coming years. Its long line of products bring solutions in several healthcare departments, including virology, neuroscience, oncology, immunology, and general medicine.
The company has established an incomparable relationship with its suppliers, bringing an elevated level of reliability to its industry.
Recent Results
In the year ended December 2021, the company’s net revenues increased by 22.7%, reaching $56.197 billion in total.
In Q4 2021, the gross margin ratio was 71%, while the adjusted gross margin ratio was 83.6%. The company spent 12.3% of net revenues for research and development.
Additionally, the total operating expenses and costs were $38,273 million in 2021 and $34,441 in 2020.
Diluted earnings per share increased from $2.72 to $6.45 over the year, while adjusted diluted earnings per share increased from $10.56 to $12.70.
Net earnings of $4,622 million in 2020 were increased to income worth $11,549 million in 2021.
Valuation Metrics
ABBV stock looks fairly valued at the moment. Its EV/EBITDA ratio is slightly elevated relative to its history at 10.3 compared to its historical average of 9.9.
However, its P/E ratio is discounted relative to its history at 10.5 compared to its historical average of 10.3.
Wall Street’s Take
According to Wall Street analysts, ABBV earns a Moderate Buy analyst consensus based on 11 Buy ratings, five Hold ratings, and zero Sell ratings in the past three months. Additionally, the average AbbVie price target of $149.93 puts the upside potential at 0.7%.
Summary and Conclusions
ABBV stock is backed by an impressive intellectual property portfolio composed of its drug patents. That said, with Humira set to expire in the near future, its long-term profitability profile is somewhat uncertain.
Wall Street analysts are generally bullish on it and the stock offers an attractive dividend yield, while its price target implies weak upside potential over the next year. As well, its valuation multiples trade roughly in line with historical averages.
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