Image Source: Pixabay

On June 20, 2024, AbbVie Inc. (NYSE: ABBV) announced that it has received FDA approval for expanding the use of its interleukin-23 (IL-23) inhibitor, Skyrizi, to treat adults with moderate to severe ulcerative colitis.

This approval is a significant milestone, making Skyrizi now available for four different conditions in the U.S., including psoriatic arthritis, plaque psoriasis, and Crohn’s disease.

Supported by robust data from two Phase 3 clinical trials, INSPIRE and COMMAND, the approval highlights Skyrizi’s potential to become a cornerstone therapy in AbbVie’s portfolio, particularly as a successor to its blockbuster drug Humira.

Strategic partnerships and acquisitions

In addition to the Skyrizi news, AbbVie has been actively pursuing strategic partnerships and acquisitions to bolster its pipeline and diversify its revenue streams.

A notable example is the recent licensing agreement with Chinese biopharma company FutureGen for the development of FG-M701, a promising treatment for inflammatory bowel disease.

This deal, worth up to $1.71 billion, underscores AbbVie’s commitment to expanding its presence in the gastrointestinal therapeutic area.

Furthermore, AbbVie is making progress with the Federal Trade Commission (FTC) on its $8.7 billion acquisition of Cerevel Therapeutics, which will enhance its neuroscience portfolio.

Financial performance

Fundamentally, AbbVie is performing well, showing resilience despite the challenges posed by the loss of exclusivity for Humira. In the first quarter of 2024, AbbVie reported a modest 0.7% year-over-year revenue growth, a sign of recovery following a difficult 2023.

The company’s growth ex-Humira has been robust, with a notable 15.6% increase driven by strong performances in its neuroscience, immunology, and oncology segments.

Earnings per share (EPS) also showed significant improvement, with GAAP EPS increasing by a staggering 492.3%, although this was partly due to favorable comparisons with the previous year.

Analysts’ views and valuation

Analysts generally hold a positive outlook on AbbVie’s future performance. Piper Sandler recently reiterated an “Overweight” rating on AbbVie, while increasing the price target on the stock to $190 from $185, citing the company’s solid pipeline and strong growth prospects in immunology and oncology.

HSBC also upgraded the stock to a ‘Buy’ from ‘Hold’, while keeping its price target unchanged at $185.

Analysts at Cantor Fitzgerald who recently initiated coverage on the stock seem to be most bullish with an ‘Overweight’ rating and a price target of $200 highlighting AbbVie’s strategic acquisitions and its diversified portfolio as key growth drivers.

When it comes to valuation, AbbVie appears attractively priced compared to its peers. The company’s trailing twelve months (TTM) price-to-operating income (P/OI) ratio stands at 17.32x, which is lower than that of major competitors like Eli Lilly and Novo Nordisk.

This suggests that there is potential upside for AbbVie’s stock.

Moreover, the forward non-GAAP P/E ratio of 15.24x is favorable, particularly when compared to the healthcare sector’s median of 19.3x, indicating that AbbVie is undervalued relative to its sector.

AbbVie also offers an appealing forward dividend yield of 3.65%, significantly higher than the healthcare sector average of 1.44%. This consistent dividend growth over the past decade provides a reliable income stream for investors, adding to the stock’s attractiveness.

Potential risks

Despite the positive outlook, investors should remain mindful of potential risks. AbbVie’s aggressive acquisition strategy, while beneficial for growth, could also pose risks to earnings if new acquisitions do not perform as expected or lead to integration challenges.

However, the company’s strong track record in executing and integrating acquisitions provides some reassurance.

Now, let’s see what the charts have to say about AbbVie’s stock price trajectory. With the fundamentals in mind, we can turn to the technical analysis to forecast whether AbbVie stock could indeed reach the $200 mark soon.

AbbVie’s stock experienced a strong rally, nearly tripling in value between March 2020 and April 2022. After this significant gain, the stock entered a consolidation phase, trading within a range of $130 to $170 for almost two years.

Facing resistance above $180

Earlier this year, AbbVie’s stock broke out of this range and reached a new all-time high of $182.89. However, it couldn’t maintain the bullish momentum above $180 and soon dropped to around $155, indicating short-term weakness.

Despite a swift rebound from this recent low, the 50-day moving average remains below the 100-day moving average.

(Click on image to enlarge)

ABBV chart by TradingView

Currently, the stock isn’t firmly in the control of either bulls or bears, suggesting it may remain choppy in the medium term. Investors should wait for the stock to break above $180 and achieve a weekly close above this level before considering new long positions.

For bearish traders, shorting the stock above $175 with a stop loss at $183.60 could be a strategy. If bearish momentum builds and the stock drops below the previous swing low of $153.58, it may fall to the next support level at $138, where profits can be booked.

More By This Author:

Gold Prices Rise On News Of Russia - North Korea Defense Deal
USD/CHF: Death Cross Nears Ahead Of The SNB Rate Decision
Bristol-Myers Squibb Stock Price Forecast: Is The Downtrend Finally Over?