Why is AbbVie Stock Falling, but Still Good Long-Term?
Why is AbbVie stock dropping today but still a solid investment? Its solid base, robust pipeline and dividend support a long position in ABBV stock.
By Chris Markoch
October 31, 2022
This story originally appeared on MarketBeat
AbbVie Inc. ( NYSE:ABBV) stock is down 3% in midday trading after the company posted a mixed earnings report. However, that’s a significant improvement from where AbbVie stock opened. In the pre-market, the stock dropped 6% after the released report.
This seems to be a case of ready, fire, aim. As investors have had a chance to look at the report, there’s not a lot of unexpected news. By now, the fact that AbbVie will lose patent protection on Humira is old news. In fact, that news — along with the broader macroeconomic drop — has been holding AbbVie stock down for most of the year.
Prior to the earnings report, ABBV stock was up 7% in the past month. That had pushed the stock past two key technical levels. Specifically, the stock had moved above both its 50- and 200-day ascending moving averages.
After the initial gap down, the stock holds above those levels, which may indicate that there’s more room for ABBV stock to run.
What Was in the Earnings Report? Revenue of $14.81 billion was lower than analysts’ expectations of $14.96 billion. However, on the bottom line, the company beat expectations of $3.57 earnings per share (EPS) with a solid $3.66 EPS. The company also narrowed its guidance for full-year EPS. It now expects to come in at a range of $13.84 to $13.88. The midpoint would be in line with analyst estimates.
Questions come in for AbbVie on the top line. Revenue from the company’s flagship immunological drug portfolio came in just a smidge below expectations ($7.65 billion instead of $7.66 billion). This includes Humira, Rinvoq and Skyrizi. Of that $7.65 billion, $4.9 billion came from Humira.
As Humira loses its patent protection, the threat from biosimilar drugs is real. However, earlier this year, the company confirmed its guidance for the combination of Rinvoq and Skyrizi to deliver over $15 billion in combined revenue by 2025. Barring an expedited review, the company is on track to launch its ABBV-154 candidate by late 2026 or 2027. The company expects this to be the next generation of Humira.
The Dividend King Will Remain on its Throne AbbVie joined the exclusive Dividend Kings club in 2022 when it increased its dividend for the 50th consecutive year. The company announced it would increase the dividend by 5% starting in 2023.
That’s below the rate of growth that AbbVie investors have come to expect but it’s still a nice reason to own the stock, particularly when it already pays out $5.64 per share on an annual basis.
ABBV Stock Still Looks Like a Strong Long-Term Buy AbbVie’s results were just iffy enough for investors to take some profit off the table. The fact that shares have recovered about half of the pre-market loss suggests this is not part of another leg down. It also suggests that investors are now taking a closer look at what was still a solid earnings report.
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VALUATION:
Depending on what multiple you want to assign ABBV, here are the intrinsic value scenarios.
Best Case .. $181.50 -- Undervalued by 20%
Base Case .. $122.01 -- Overvalued by 16%
Worst Case .. $96.50 -- Overvalued by 33% |
