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AbbVie Remains One of the Best Buys in Its Sector

Thursday, April 29, 2021 | Chris Markoch
AbbVie Remains One of the Best Buys in Its Sector

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.  

Featured Article: Investing in Dividend Stocks


7 Outdoor Recreation Stocks For Growth And Dividends

If American’s liked outdoor activities before, they love them even more now. The COVID-19 pandemic has done many things, and one of them is reinvigorating American’s love of the outdoors. Data from across the industry shows a sustained uptick in revenue that has the entire complex moving higher.

The RV Industry Association, for example, reports shipments of RVs are up greater than 30% in 2020 and are expected to grow another 20% or more in 2021. If data from the two of the industry’s largest manufacturers are any indication, that forecast is very conservative.

And the gains aren’t limited to RVs. Everything that has anything to do with outdoor recreation is booming. Sales at Dicks Sporting Goods, an iconic brand for retail and the outdoors, has seen a sustained 20% increase in revenue since the 2nd quarter shutdowns. If anything, revenue in this sector is being held back by rapidly declining inventory and tight shipping conditions.

The stocks we are about to show all have something in common; the outdoors. Within the group, you will find everything from RVs to Radios and everything in between an outdoor enthusiast could need or want. Some pay dividends and some don’t, but all will deliver solid returns to investors in 2021.

View the "7 Outdoor Recreation Stocks For Growth And Dividends".


Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
AbbVie (ABBV)2.7$116.43-0.1%4.47%24.62Buy$117.13
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