AbbVie Remains One of the Best Buys in Its Sector
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AbbVie (NYSE:ABBV) will be among the stocks closing out a busy earnings week. Earnings season tends to draw a lot of interest from investors, but it’s not always the best indicator of a stock’s overall trajectory.
That’s been particularly true in the last 18 months where more and more speculative money have been chasing fewer and fewer growth opportunities. This has tended to move money to sectors that offer traders the opportunity for fast gains. And it leaves stocks such as AbbVie on the outside looking in.
It’s true that ABBV stock is up 32% in the last 12 months. But in the six months ending on October 29, 2020, AbbVie was in the red. Nevertheless AbbVie is closing in on its 52-week high of $113.41 and I expect that earnings may put it over the top.
But if you’re buying AbbVie simply based on earnings, you’re missing a much bigger story. AbbVie is simply one of those stocks that belongs in any investors portfolio.
What Have You Done For Me Lately?
Like many things in life, investors tend to have recency bias. That would seem to work in AbbVie’s favor. In 2020, the company delivered revenue of $45.79 billion. That was an increase of nearly 38% from the prior year. And on the bottom line, AbbVie also delivered impressive 17% growth.
In fairness, that level of growth is likely an anomaly. In 2019, the company’s revenue only increased about 1% from 2018. However earnings growth was 13%. And in the two year’s prior to that AbbVie posted revenue gains of 16% and 10% respectively.
Plus, if AbbVie meets expectations, the company will deliver first quarter 2021 revenue that will be 48% higher than the same quarter in 2020. And the company is also expected to post 14% growth on the bottom line.
The nature of AbbVie’s business (I.e. pharmaceuticals) was not largely affected by the pandemic. People were going to find ways to get the prescriptions they needed. Therefore, the 48% gain can’t be explained by comparing to a historically low year as can be said of other sectors.
Investors Are Concerned About Humira
The ABBV stock chart since the beginning of 2021 looks like a roller coaster with the stock bouncing between $100 and $110 per share. One of the concerns that has been dogging AbbVie is that it will lose its exclusive U.S. rights to Humira, its wildly popular arthritis drug, in 2023.
AbbVie reported a 13.7% decline in international sales of Humira in 2020 and so analysts are attempting to crunch the numbers. In this case, they’re attempting to discern if the company’s revenue growth from immunology drugs Skryizi and Rinvoq. In 2020, those drugs delivered net revenue of $1.59 billion and $731 million respectively. AbbVie management is forecasting the combination of these two drugs could reach $15 billion by 2025.
In my opinion, all of this conjecture misses the larger point. AbbVie has a large pipeline. And while it’s impossible to forecast exactly when that will turn into revenue, it will turn into revenue. So making a decision on ABBV stock based on the results of any one quarter is not going to be helpful.
Over time, AbbVie will continue to be a solid growth stock. And don’t forget that the company is a Dividend Aristocrat with 49 consecutive years of dividend growth. Plus in the last three years, it’s delivered dividend growth of nearly 85
The Bottom Line on AbbVie
While many investors like to time stocks in advance of earnings reports, that should not be your mindset with AbbVie. This is the definition of a buy-and-hold stock. Whether you are looking for some capital growth or simply to collect income from a rock-solid dividend, ABBV stock merits a place in your portfolio.
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