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Abbvie - Still Undervalued With More Room To Grow

Aug. 01, 2021 6:37 PM ETAbbVie Inc. (ABBV)96 Comments
Thomas Richmond profile picture
Thomas Richmond


  • Abbvie looks like a great opportunity for dividend investors today, offering a 4.5% yield with 49 consecutive years of dividend growth.
  • No company is immune to hardships. Abbvie is working to grow sales in its rheumatoid arthritis drug, Rinvoq, to negate the sales decline Humira will see in 2023.
  • Abbvie's had an impressive price run so far - and the stock still has more room to grow.

vzphotos/iStock Editorial via Getty Images

Abbvie (NYSE:ABBV) is undervalued and looks to be a great pick for dividend investors. The company is on track to become a Dividend King in the near future, with the company's 49-year track record of

This article was written by

Thomas Richmond profile picture
Clean and common sense write-ups. Thomas is pursuing a BSBA in Finance at Bryant University. Becoming the greatest investor of all time.Thomas specializes in finding deep value stocks trading at a deep discount to intrinsic value. Warren Buffett made his highest returns of his career buying small stocks that were deeply undervalued."I think I could make you 50% a year on $1 million. No, I know I could. I guarantee that.” - Warren BuffettWhen Thomas isn't doing stocks, Thomas also enjoys weightlifting, playing chess, and is generally obsessed with all things business.Shared association with Seeking Alpha Author Eagle Investing

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Comments (96)

BAHAMAS1 profile picture
ABBV's management is becoming more questionable and the company could be ripe for a takeover / buy out...imo.

awfully large for a buyout
LookingAtStocks profile picture
@BAHAMAS1 $204 billion Market Cap company...a takeover's not going to happen anytime soon.
BAHAMAS1 profile picture
I agree, however a "merger" could be in order, as could further outside
Investment group(s) that successfully add further value to companies.
Jacobin777 profile picture
$ABBV is close to 8% of holdings in one of my ETF's ( $FTXH ) so I'm happy there. :-)
Thomas Richmond profile picture
it's not something millennials would buy since it has earnings and dividends
Thomas Richmond profile picture
@user 11202791 Hahaha true
Zucks profile picture
Just from a qualitative perspective? If a company is known to be going to loose millions in business in a known period of time. Historic data is misleading. I’ld hike the terminal cap rate. Period. However, I do agree with your assertion the board is trying to get ready for the inevitable, but will they keep the dividend the same. I generally buy snd hold but there is always a trade to be made.
@Zucks Why ABBVIE bought Allergan to make up for lost humera revenue
Thomas Richmond profile picture
@Zucks Thanks for your feedback, that makes sense
Flex68 profile picture
@Zucks ,

+23.9% over 1 year;
+70.3% over 5 years;
+246.8% since 12/14/12.

All whist increasing dividend from 57¢ in Oct 2016
to $1.30 in July 2021.
Whitewing profile picture
Have heard so much chat about the fear of losing Humira patents but the bottom line is they have made great pipeline acquisitions, and they will start paying off. Since I am in at $70, and have continued to reap the dividends, I feel like my money is very well spent. DCA puts me at about 7.4% dividend alone.
exactly with you bought a 68$ so my ROI is about 8%
Thomas Richmond profile picture
Mick Research profile picture
Where is the growth?
According to Yahoo Finance, growth estimates for the next 5 years are low, just 4.5%

@Mick Research yes that’s because they are set to have two declining years in 2023 and 2024 and then expected to return to growth after that
Mick Research profile picture
@KillaK "expected to return to growth after that"
How exactly are they going to do that?, if I may ask
@Mick Research Humira patent will expire and since thats their biggest revenue source, revenue will probably decline from biosimilar competition. however they have many new drus which are growing rapidly and will be able to offset the decline and deliver revenue growth in 4 years
Buyandhold 2012 profile picture
Since it was spun off Abbott Labs on January 2, 2013, AbbVie has had an average annual return with dividend reinvestment of 19.91%.

That is truly outstanding.

AbbVie is one of my favorite stocks.
Thomas Richmond profile picture
@Buyandhold 2012 Thanks for sharing!
Puche profile picture
Articles like this pop up after every earnings report. With 75-80% of your value built in to the terminal value, I personally put little credibility into the Contributors discounted CF model. It looks good but IMO is very misleading in providing strong quantifiable evidence to ABBV’s LT valuation. Of course that’s just my two cents.

IMO ABBV continues to be in a channel around $80 - $120. With it at the high end of that range, I expect it to run into resistance at this point. Yes, the dividend is solid and growing but no, it’s no longer a 15 - 20% capital appreciation grower (excluding dividends) from its current levels of approximately $120.

I’ve been consistent for awhile on ABBV and so far I seem to be more right than wrong. LOL!

Slow and steady! Good luck to all!
@Puche well if that’s your consistent opinion then you have been dead wrong . Because since buying in October of 2019 I have averaged over 23 percent annualized returns and that was while averaging up this whole time. Has I simply bought in late 2019 and not added anymore we could add another 10 percent to that. Timing is everything and while I won’t be adding any more here since I am already very long, I believe you could see double digit annualized returns for the next 5 years when adding here. The fact that we’re are getting closer to the parent cliff and they stock has been rising tells me the market is starting to realize the stock is undervalued and even with LOE on Humara things still look good for Abbvie
Puche profile picture
@KillaK so you averaged 23% annualized return for LESS THAN 2-years. Oh, I didn't realize you are a momentum trading investor. I'm a much longer term investor who focuses on transformational stories. For example, I bought REGN way back prior to EYLEA being approved or even named down in the low $20. Over 15-years later I still own a material position in the family office and expect to be a shareholder for at least another 10+ years. Another more recent story was MRNA. As fully disclosed with the SA community, I started buying MRNA shortly after it's 12/2018 IPO and well before the majority of investors ever heard of MRNA or anything it was studying. Again, as fully disclosed to the SA community, I aggressively played the stock on both the underlying and derivative side. Upon the breakout in March 2020 I more than quadrupled and already material position in the family book. That's what a strong understanding of the underlying technology and science allows you to do without hesitation. Why not take the same approach on ABBV if you are so confident it can deliver double digit returns for years to come? I finally got called away recently on a small portion of my oversize position and was happy to raise some additional capital. I expect to be a MRNA shareholder for at least another 10++ years. For the record, I found MRNA back around 2014-2015 when it was still a private company and have been following the story ever since.

Sounds like our investment styles are dramatically difference. You seem to play short term momentum stocks for short term gains. IMO (no issue with you having a different opinion) that is an extremely difficult way to make consistent long term gains NET of the tax effects. For me, I'm a thesis long term investor who does extensive research and analysis on the companies the family office takes positions in. A build positions over the first bunch of years and follow the story closely. As the SA community knows, I utilize derivatives extensively to manage my risks, buy stocks at lower than current prices, and drive my returns higher.

Like I said, no issue with you having a different approach. For me 23% compounded returns over a less than 2-year period is outstanding but probably implies a little bit more luck than I like to have in my investment thesis. I prefer to have my investments over 15+ years go from $20 to $550 and $15 to $350 and then continue higher.

All just my two cents. Slow and steady! Good luck with your ABBV long position up at $116! I hope it works out for you!
whats it PE and EPS
BM Cashflow Detective profile picture
AbbVie is poor value based on its 5y PEG ratio of 2.04. So close to the limit of a buy rating.

But AbbVie is good value based on its 3y P/FCF/G ratio of 1.01. This makes it a clear buy.

I'm long $ABBV

AbbVie will earn more cash in the future than the majority of market participants expect. Overcautious and subliminal pessimism about Humira generate another buy signal.
SleepyInSeattle profile picture
@BM Cashflow Detective Agree! I too am long $ABBV.
Thomas Richmond profile picture
@BM Cashflow Detective Thanks for sharing
02 Aug. 2021
Good article. I'm long on ABBV but I do not understand why You claim that it has a 49 yr. dividend record? ABBV is a biotech split of ABT who has that long dividend record.
@JPV see page 7, the section on spin-offs
www.spglobal.com/... According to the S&P Global methodology, if spin-offs continue the dividend policy of the parent company, they are retained in the index. In other words, their dividend history counts in that case.
Thomas Richmond profile picture
@strivingtoberational Thanks for sharing
SJ09 profile picture
I own some ABBV and will hold them but do not agree with the author that it's a buy at these levels. I think that he underplays the Humira risk. And given that ABBV is a spinoff I'm not sure what weight to place on the dividend history.
Thomas Richmond profile picture
@SJ09 Thank you for your feedback; both points make sense
I love ABBV
horowitzcpa profile picture
@Thomas Richmond I don’t see where you’re addressing the company’s debt. Sooner or later that bill’s coming due….
Thomas Richmond profile picture
@horowitzcpa Gets factored into the valuation. Net debt gets subtracted from discounted cash flows
Anyone know what happened on Friday?

Beats on EPS and revenue, raises non-GAP EPS, and the FTC drops their anti-trust law suite. Not a bad day yet the stock tanked 2.16%???

I understand some folks view on Humira but this team just keeps making what appears to be all the right moves and yet every time I think things are starting to improve the stock gets whacked.
Flex68 profile picture
@LongviewInvestor ,

Perhaps you're missing the longer-view:

ABBV is up 12.9% over the past 6 months, and up nearly 45% since late October 2020.

EFT's might be more your style......

although with your 'handle' of being a long view investor, I have to wonder
Eric Bradley profile picture
Sold a bunch of $114 puts on Friday. Will see if there is a follow through and I get them assigned within the next 2 weeks.

Have enough shares, but when on sale…

Puche profile picture
@Flex68 I assume you realize the stock has been in a channel between $75-$120 since around the 2018 and has done little relative to the overall market since early 2018. Just my two cents. Slow and steady! Good luck to you!
Income4ever aka Cyclenut profile picture
Nicely done,
Agree that ABBV is as solid as they come and still a buy even at this price.
Flex68 profile picture
The company is a beast, and I love the nearly 4.5% dividend yield.

But anyone waiting for the author's suggestion of :

"This model suggests 2 Buy Prices where you could make even higher returns:

$75/share - 22% annual returns"

will likely be waiting a while.....maybe forever.

Humira fears have been yakked about for more years than are remaining on exclusivity, and ABBV has scarcely stood still during that time.
Eric Bradley profile picture

Bought some in the last couple of months around $112.
Probably not going to see $75 again without negative, company specific news.

Market pullback could easily let us pick up shares around $105 though.

I always have some spare change between my couch cushions for such opportunities.

Thomas Richmond profile picture
@Flex68 Yep, 22% annual returns would be the dream, but probably not going to fall there any time soon
Will ABBV go on the merger hunt to deploy free cash flow ?

Will ABBV be making huge increases in their dividend to stabilize their undervalued price ?

What does ABBV want to become from where they have gone through to achieve stellar results and no market price respect from the Market ?
@manfac they have to pay off the Allergan acquisition debt and grow the next generation of their products first.

Management suggested on several CCs that major acquisitions and dividend boosts are not likely for the next few years.
I couldn’t get past the tone-deaf, sexist quote from Teddy Roosevelt. Times have changed…🙄
@SoCalForever I always teach my daughters “if any tiny little thing offends you immediately stop listening” better they don’t learn to pull gems of wisdom from piles of dirt. Strong point.
@SoCalForever So have the Beaches of SoCal. Enjoy your "times".
@Feckless191 R I G H T O N !!!!!!!!!!!!!! Well said! I can hear envy and failure in his/her words!
Bill West profile picture
Well done young man...............on Follow......
@Bill West Agree!!
Thomas Richmond profile picture
@Bill West Thank you Bill!
LittleMilk profile picture
Nice quality article as always though mate! Definitely on my watchlist.. 😎
Thomas Richmond profile picture
@LittleMilk Nice man, thanks Moogy!
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