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AbbVie: Potential 20% To 30% Share Price Gains

  • Benefits of the Allergan acquisition for AbbVie EPS are not yet reflected in the AbbVie share price.
  • As investors come to better understand the impact on AbbVie of the Allergan acquisition, expect the recent contraction of the P/E multiple to be reversed.
  • A combination of higher forward EPS estimates and multiple expansion has the potential to drive AbbVie share price up by 20% to 30% and higher.

About AbbVie

Source: AbbVie Presentation

AbbVie: Investment Thesis

A detailed analysis suggests a significant increase in Bristol-Myers Squibb adjusted non-GAAP EPS, purely as a result of the combination, and before any savings due synergies. A similar situation exists with the AbbVie (ABBV) acquisition of Allergan (AGN), and just as with Bristol-Myers (BMY) and Celgene (CELG), we believe the market has not yet priced in the effect of the combined EPS being greater than the sum of the parts. Furthermore, despite growing EPS, the AbbVie share price has been held back over the last 2 years by a shrinking P/E multiple, brought on by concerns of a decline in EPS following Humira loss of exclusivity (“LOE”) in 2023. My analyses indicate post merger, AbbVie EPS estimates will be considerably higher than projected in current publications of analysts’ consensus estimates. In addition, as a result of the Allergan acquisition, EPS will likely not decline in 2023, despite Humira LOE. In the next 5 to 7 months, we see the likelihood of a 20% to 30% and greater increase in the AbbVie share price from the current $83.54 to ~$100 to $115 and possibly higher. These increases will likely be driven by higher EPS when the effect of the structure of the combination is reflected in analysts’ estimates, together with PE multiple expansion, given the more certain direction of AbbVie’s future EPS growth.

AbbVie is selected in our Selection List Bio-Technology January 2020.

Check out the Report and the rest of the selection list at our Category Bio-Tech.

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Disclaimer: The opinions in this document are for informational and educational purposes only and should not be construed as a recommendation to buy or sell the stocks mentioned or to solicit transactions or clients. Past performance of the companies discussed may not continue and the companies may not achieve the earnings growth as predicted. The information in this document is believed to be accurate, but under no circumstances should a person act upon the information contained within. I do not recommend that anyone act upon any investment information without first consulting an investment advisor and/or a tax advisor as to the suitability of such investments for their specific situation. Neither information nor any opinion expressed in this article constitutes a solicitation, an offer, or a recommendation to buy, sell, or dispose of any investment, or to provide any investment advice or service. An opinion in this article can change at any time without notice.

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