I am neutral on AbbVie (ABBV) as it has a very strong moat and Wall Street analysts are generally optimistic about it, but its price target and valuation multiples imply that it is not particularly cheap at the moment.
AbbVie was founded in 2013 with its headquarters in Illinois, as a biopharmaceutical company. AbbVie was created to separate the research-based pharmaceutical manufacturing company from Abbott Laboratories.
The company has acquired several other companies, such as ImmuVen, and has also entered into global collaborations with some, including Infinity Pharmaceuticals.
According to a 2020 report, AbbVie had around 47,000 employees and its operations were in around 70 countries across five different regions.
Although the company was founded less than ten years ago, it has developed strong partnerships in the biopharmaceutical industry.
AbbVie has a strong global footprint and an even stronger team of employees spread across multiple countries. The company has developed multiple manufacturing facilities in North America and Europe, bringing its manufacturing capabilities above most competitors.
With a strong workforce, a diverse portfolio and expansions across multiple continents and countries, AbbVie can grow slightly in the years to come. Its extensive product line provides solutions across multiple health departments, including virology, neuroscience, oncology, immunology, and general medicine.
The company has established an unrivaled relationship with its suppliers, bringing a high level of reliability to its industry.
In the fiscal year ending December 2021, the company’s net revenue increased 22.7% to $56.197 billion in total.
In the fourth quarter of 2021, the gross margin ratio was 71%, while the adjusted gross margin ratio was 83.6%. The company devoted 12.3% of its net sales to research and development.
Additionally, 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 during the year, while adjusted diluted earnings per share increased from $10.56 to $12.70.
Net income of $4,622 million in 2020 increased to income of $11,549 million in 2021.
ABBV stock looks fairly valued at the moment. Its EV/EBITDA ratio is slightly high compared to its historical at 10.3 compared to its historical average of 9.9.
However, its P/E ratio is discounted from its historical to 10.5 from its historical average of 10.3.
The Taking of Wall Street
According to Wall Street analysts, ABBV has a moderate buy analyst consensus based on 11 buy ratings, five hold ratings and zero sell ratings over the past three months. Additionally, AbbVie’s average price target of $149.93 puts the upside potential at 0.7%.
Summary and conclusions
ABBV’s shares are backed by an impressive intellectual property portfolio consisting 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 this and the stock offers an attractive dividend yield, while its price target implies little upside potential over the next year. Additionally, its valuation multiples are trading roughly in line with historical averages.
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