AbbVie stock (NYSE: ABBV) has greater than doubled in worth since early January 2021 – leaping from ranges of $90 then to round $195 now – vs. a rise of about 50% for the S&P 500 over this era. This may primarily be attributed to a big 80% rise within the firm’s P/S ratio to six.4x now, versus 3.6x in 2020. Buyers have rewarded ABBV inventory due to the uptick in its gross sales regardless of the biosimilar competitors for its blockbuster drug – Humira.
Nonetheless, the rise in ABBV inventory has been removed from constant. Returns for the inventory had been 32% in 2021, 24% in 2022, and 0% in 2023. Compared, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 24% in 2023 — indicating that ABBV underperformed the S&P in 2023.
In reality, persistently beating the S&P 500 — in good occasions and unhealthy — has been tough over latest years for particular person shares; for heavyweights within the Well being Care sector together with JNJ, UNH, and PFE, and even for the megacap stars GOOG, TSLA, and MSFT. In distinction, the Trefis High Quality (HQ) Portfolio, with a set of 30 shares, has outperformed the S&P 500 annually over the identical interval. Why is that? As a bunch, HQ Portfolio shares supplied higher returns with much less danger versus the benchmark index; much less of a roller-coaster experience, as evident in HQ Portfolio performance metrics.
Given the present unsure macroeconomic setting with excessive oil costs and elevated rates of interest, might ABBV face an identical state of affairs because it did in 2023 and underperform the S&P over the following 12 months — or will it see a powerful bounce? We expect ABBV inventory is absolutely priced now. It trades at 6.3x revenues, versus the inventory’s common P/S ratio of 4.4x seen during the last three years. Our AbbVie Valuation Ratios Comparability dashboard has extra particulars. Whereas a slight rise in valuation a number of appears justified given the market share positive aspects for its new medication, we expect ABBV inventory is now absolutely valued.
AbbVie’s income rose 19% from $45.8 billion in 2020 to $55.0 billion within the final twelve months. The corporate’s income development has been buoyed by its Allergan acquisition in 2020. AbbVie is greatest identified for its blockbuster drug – Humira – used to deal with rheumatoid arthritis and Crohn’s illness, amongst others. Humira’s gross sales peaked at $21.2 billion in 2022, earlier than falling 32.2% y-o-y to $14.4 billion in 2023. This may be attributed to the biosimilar competitors.
AbbVie, to some extent, can fight the lack of income from Humira by market share positive aspects for a few of its comparatively new medication – primarily Skyrizi and Rinvoq. These medication are used to deal with plaque psoriasis and rheumatoid arthritis. For perspective, these two merchandise garnered $11.7 billion in 2023, reflecting a stable 53% y-o-y development. The gross sales of its anti-depressant – Vraylar – additionally spiked 35% y-o-y to $2.8 billion in 2023. For the six-month interval ending June 2024, Skyrizi and Rinvoq continued their market share positive aspects, with gross sales rising 50% y-o-y to over $7 billion. AbbVie can also be inorganic development. After its acquisition of Allergan in 2020, it acquired ImmunoGen for $10.1 billion this 12 months, giving it rights to Elahere — an ovarian most cancers remedy – with estimated peak gross sales of over $2 billion. Our dashboard on AbbVie’s Income Comparability affords extra particulars on the corporate’s gross sales.
Though AbbVie has seen its revenues rise currently, its working margin has contracted from 27.8% in 2020 to 24.9% now. This clubbed with bills associated to IPR&D and milestones has weighed on its backside line currently. For the full-year 2024, the corporate expects its adjusted earnings per share to be within the vary of $10.61-10.81, in comparison with a determine of $11.21 in 2023.
General, AbbVie is poised to ship mid-single-digit common annual top-line development over the following three years regardless of the headwinds for Humira. Buyers have rewarded the inventory with a better valuation a number of, however is it value choosing now? We don’t suppose so. We imagine that the positives round new medication are already priced in, and buyers keen to enter will seemingly be higher off ready for a dip. Notably, the common analyst worth estimate of $197 for ABBV additionally aligns with the present market worth, implying that the inventory is now absolutely valued.
Whereas ABBV inventory appears absolutely valued, it’s useful to see how AbbVie’s friends fare on metrics that matter. You’ll discover different helpful comparisons for firms throughout industries at Peer Comparisons.
| Returns | Aug 2024 MTD [1] |
2024 YTD [1] |
2017-24 Whole [2] |
| ABBV Return | 5% | 30% | 336% |
| S&P 500 Return | 1% | 17% | 150% |
| Trefis Strengthened Worth Portfolio | 5% | 12% | 734% |
[1] Returns as of 8/29/2024
[2] Cumulative whole returns because the finish of 2016
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The views and opinions expressed herein are the views and opinions of the writer and don’t essentially mirror these of Nasdaq, Inc.
