(C) Reuters. AbbVie Stock: Price Seems Fair for Biopharmaceutical Play
I am bullish on AbbVie (NYSE:ABBV), because its valuation multiples indicate that it trades at a discount to its fair value based on past history.
Furthermore, the dividend yield makes it an attractive income stock.
AbbVie is an American biopharmaceutical company that has a mission to discover and commercialize innovative medicines that provide solutions to the serious health issues of today.
The company’s key areas include immunology, virology, oncology, gastroenterology, women’s health, eye care, neuroscience, and products and services in its Allergan (NYSE:AGN) Aesthetics portfolio. (See Analysts’ Top Stocks on TipRanks)
AbbVie has almost 30,000 employees across the world. The company has placed a responsibility on itself to find cures for “incurable” diseases to create a positive impact on the lives of its patients, which has led to it developing the anti-rheumatic drug Humira.
The company has been recognized by big brands like “ROBECOSAM,” “FTSE4Good,” and “World’s Best Workplaces” for its fight to create a healthier world.
The company also has a strong manufacturing capacity, and a diversified portfolio of innovative products, plus strong technological capabilities.
In its Q2 2021 report, AbbVie reported net global revenues of almost $14 billion, up 33.9% year-over-year from $10.4 billion in Q2 2020.
The biopharmaceutical company reported earnings of $3.11 per share for the second quarter, which met the consensus estimate, but exceeded AbbVie’s own guidance range of $3.05 to $3.09. Earnings rose 32.9% as compared to the second quarter of 2020.
Net revenue also grew 19.3%, and GAAP diluted earnings per share declined 8.7% year-over-year to $0.42 in the second quarter ended June 30, 2021.
AbbVie’s immunology segment contributed $6.1 billion to total revenue, and saw a growth of 13.8% on a comparable operational basis, and 15.1% on a reported basis.
In the United States, sales of Humira generated $4.3 billion, up 7.1% on a reported basis. However, the drug’s international net revenue fell by 6% to $811 million on a reported basis owing to competition.
AbbVie has updated its GAAP EPS (diluted) guidance for Fiscal Year 2021 to $7.47 from $7.27. Moreover, the diluted EPS (adjusted) for FY2021 was increased to $12.62 from $12.52.
In June, the company also expanded its $1 billion alliance with Calico Life Sciences to discover, manufacture, and sell drugs for age-related diseases, including neurodegenerative disorders and cancer.
AbbVie’s stock looks attractively valued right now as its EV/EBITDA ratio and price-to-normalized earnings ratio both indicate the stock is trading below its historical average.
The EV/EBITDA ratio is currently 9x compared to its five-year average of 9.9x, and the price-to-normalized earnings ratio is currently 8.5x compared to its five-year average of 10.5x.
Wall Street’s Take
From Wall Street analysts, AbbVie earns a Strong Buy analyst consensus based on 10 Buy ratings, two Hold ratings, and zero Sell ratings in the past three months. Additionally, the average AbbVie price target of $128.33 puts the upside potential at 15.6%.
Summary and Conclusions
AbbVie is a leading global pharmaceutical company whose stock price looks to be undervalued at present, based both on its valuation multiples as well as Wall Street’s overwhelming bullishness on the stock at current prices.
Furthermore, the company has a strong pipeline to replace Humira, and its attractive dividend yield means it could be a good addition to a dividend portfolio.
Disclosure: At the time of publication, Samuel Smith did not have a position in any of the securities mentioned in this article.
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