AbbVie: A Promising Outlier in the Pharmaceutical Sector

Despite the underperformance of large pharmaceutical companies in 2023, AbbVie stands out as a potential winner, according to analyst Chris Shibutani from Goldman Sachs. Shibutani has upgraded AbbVie's rating to Buy from Neutral and set a price target of $173.

Strong Performance Ahead

AbbVie's flagship drug, Humira, has surpassed expectations by maintaining robust sales despite the emergence of multiple biosimilar competitors. Humira is widely prescribed for various conditions, including arthritis and Crohn's disease. Based on this performance, Shibutani is confident that AbbVie's portfolio and management can continue to deliver strong earnings in the future.

Cornerstones of Success

Two key products in AbbVie's core immunology franchise, Rinvoq and Skyrizi, have shown impressive revenue growth. Shibutani anticipates that their superior performance will enable them to capture a larger market share, ensuring continued success. Additionally, AbbVie's aesthetics franchise is poised for a potential rebound in 2024, bolstered by the dominant position of Botox in the industry.

Positive Outlook

Shibutani's positive outlook extends through 2025. He has increased his earnings per share estimates for AbbVie, making its current valuation particularly attractive. With a valuation of just 13 times his 2024 earnings estimate of $11.23, AbbVie appears to be undervalued.

AbbVie's stock price responded positively to Shibutani's upgrade, gaining 1.3% in midday trading to reach $151.19. However, despite this increase, the stock still has considerable upside potential, as it remains nearly 15% below the target price suggested by Goldman Sachs.

AbbVie stands out as a promising outlier in the pharmaceutical sector. With its resilient sales of Humira, the strength of Rinvoq and Skyrizi, and the potential rebound of its aesthetics franchise, AbbVie's future looks promising. Investors should consider taking advantage of the current undervaluation of AbbVie's stock.

AbbVie's Potential in 2022

Since being highlighted in December 2022, AbbVie has shown promising performance. However, the overall healthcare sector has faced challenges, leading to a decline in AbbVie's stock price. Despite this, experts believe that AbbVie's improvement may not be reflective of the wider industry.

Looking ahead to 2024, there is potential for a recovery in the large-cap pharma sector. After experiencing below-average stock performance in 2023, valuations have become more affordable. However, there are concerns about the industry's stability from a defensive standpoint. Negative earnings revisions have been a common vulnerability across various healthcare subsectors.

Considering this, it is crucial to closely monitor the profit trajectories of companies within the industry as they will heavily impact stock performance in the upcoming year.

Despite these challenges, there is optimism regarding certain pharmaceutical giants. Alongside AbbVie, Bristol Myers Squibb, Pfizer, and Merck are also recommended as potential investments. Among them, Merck stands out as the top pick.

With 2021 behind us, there is hope that 2024 will bring better prospects. However, it is important for investors to approach the market cautiously and selectively search for undervalued opportunities.