AbbVie Analyst Upgrades Stock To Outperform, Looks Forward To 2021

AbbVie Inc ABBV shares already discount much of the risk emanating from the COVID-19 crisis, according to an analyst at RBC Capital Markets.

The AbbVie Analyst

Randall Stanicky upgraded AbbVie from Sector Perform to Outperform and increased the price target from $79 to $93.

The AbbVie Thesis

Even with the 29% gains since the recent bottom in late March, AbbVie shares are still down 11% since the COVID-19-related downturn that started Feb. 21 compared to a more modest 2% decline by the NYSE Arca Pharmaceutical Index, Stanicky said in a note.

Stanicky expects the company to reaffirm its sector-high 5.7% dividend and provide better clarity on P&L when it issues its quarterly results May 1. EPS guidance for the year could move lower, although a step-up rebound could be in the cards in 2021 against trough valuation.

"We want to get ahead of that as the market ultimately shifts from defensive to offensive positioning," the analyst wrote in the note.

Related Link: The Week Ahead In Biotech: Eli Lilly, Biogen Earnings On Tap, Sanofi Awaits FDA Decision

Delving on AbbVie's businesses, the analyst sees the COVID-19 impact on the company to be greater than that of peers. Although the consensus has not moved down sufficiently to reflect the risk, the analyst is of the view the focus is quickly shifting to beyond this "transition" year.

Stanicky braces for a messy year for AbbVie, as the Allergan plc AGN acquisition is expected to close soon and the COVID-19 impact continues into summer. Consequently, the analyst sees some stock disruption.

"But 2021 should "step up" to more "normalized" earnings with relatively quick bounce-back around core franchises," he said.

With the pro forma valuation at historical lows, the firm said the closing of the Allergan deal will serve as a catalyst.

ABBV Price Action

AbbVie shares were up 1.8% to $84.96 at time of publication