When I went through my valuation spreadsheet today I came across on AbbVie as one of the cheapest (on P/E ratio) and high dividend yielding company. I looked at company at the beginning of the year (see more) and I found company rather risky. Year to date company is performing well having earned 5% return, especially if we compare this performance to Nasdaq Biotechnology -21%.
How is AbbVie’s business going?
Looking at share price performance the answer is simple – business is doing well. On the other side if we look on recent analysts recommendation they were reduced (still target price is above current share price). The main issues why recommendations were reduced are concerns about long term revenue generation for key products (mainly Humira). Market is changing, many biosimilar products are to be introduced and this might create substantial pressure on prices (after patents expire obviously).
Company want to diversify its business and that is why Stemcentryx was bought (for $5.8b). Company is developing a Rova-T – product to deal with small-cell lung cancer. I am not an expert, but as some partial data were revealed share price was down by 4% so definitely it was not a good news for investors.
However if we look on current portfolio I see some potential to diversify revenues in few-years’ time horizon (currently Humira is around 65% of sales).
From financial perspective company is paying a decent yield of around 3.7% and is expected to grow by double digit numbers by 2020 (wow!). This with not demanding valuation seems for me as a good opportunity. After a second consideration I think I like company more than previously. I am raising my investable level to $55. If share price drops another 10% I think I will buy shares (remember, I am always waiting for at least good opportunity)
Disclaimer ABBV – no position