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Abbott Laboratories: A Solid Buy In Uncertain Times

Mar. 10, 2020 7:44 AM ETAbbott Laboratories (ABT)7 Comments


  • Abbott has delivered strong share price growth since 2017 supported by steadily growing revenues and net income.
  • Like nearly all stocks Abbott's price has dropped sharply owing to the market turmoil related to COVID-19, but signs point to a quick recovery.
  • Nicely diversified business model shows growth in nearly every product line with some e.g. diabetes monitoring demonstrating real promise.
  • Abbott stock trades at a discount to my estimated fair value price of $100 and can recover faster than wider market - the stock looks a buy.

Investment Thesis

The past month has been a tough period for holders of equity stocks as the market, gripped by coronavirus fears, has dropped by roughly 10%, despite the government cutting interest rates in an attempt to boost investment.

Optimists may see this as a time to pick up stocks at a discount to their usual trading price, but with no clarity over when the current downturn will come to an end and many firms facing long-term disruption to core business functions, the tactic is a risky one. An alternative option is to look for stocks that are currently displaying market resilience and who are ahead of the curve when it comes to potential of a return to growth.

One such stock I have identified is Abbott Laboratories (NYSE:ABT), the manufacturer and distributor of medical products.

Abbott 1 month share price performance vs S&P 500. Source: TradingView.

As we can see from the chart above, Abbott's stock has not been able to escape the downturn, but since hitting its lowest price since June last year ($77), the share price has recovered quickly and was one of only a handful of healthcare sector stocks to gain on Friday.

Abbott 5 year share price performance. Source: TradingView.

Further encouragement can be taken from Abbott's 5 year share price performance. At its current price of $81.74 the stock is trading at a discount to its average price over the past year, which has rarely dropped below $85 and has hit highs above $90. The consistent growth since the beginning of 2017 coupled with management's projections of further 7-8% revenue growth in 2020 suggests that had it not been for macro market issues Abbott would be close to breaking $100 - especially given the 60% uplift in bottom line earnings the company achieved in

This article was written by

Edmund Ingham profile picture

I write about Biotech, Pharma and Healthcare stocks and share investment tips. Find me at my marketplace channel, Haggerston BioHealth - model portfolio + 4 exclusive stock tips every week. I'm on twitter @edmundingham

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in ABT over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (7)

Quest diagnostics is also noticeably less expensive.
Great company, but the valuation is high compared to JNJ, ABBV, GSK, and MDT
Neurology profile picture
JNJ and GSK are garbage
Buyandhold 2012 profile picture
I have been an Abbott Labs shareholder for 50 years.

I call it Old Reliable.

It always goes up over the long term.

Not to mention that it spun off Hospira, which was purchased by Pfizer for $90 a share. And it spun off AbbVie which has been doing great.

No question about it, Abbott Labs has been one of the best stocks of all time.

I view it as a potential buy whenever the 5 year expected PEG ratio is no higher than 2.00.
Jamjack profile picture
Impressive! Long since Feb. 2015 myself. Added for the first time during this coronaVirus scare not far from the 52 week low.
Great company but hard to recommend a buy at these valuations.
serpo profile picture
At a P/CF of 22 I still consider the stock as overvalued.
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