Citi Bullish On AbbVie As Allergan Deal Provides An Earnings Floor

AbbVie Inc ABBV shares are advancing to their highest level since early July following a positive analyst action on the stock.

The Analyst

Citigroup analyst Andrew Baum upgraded shares of AbbVie from Neutral to Buy with a $90 price target, suggesting roughly 25% upside from current levels.

The Thesis

AbbVie will extract significant shareholder value from its proposed Allergan plc AGN acquisition, given its "industry-leading commercial focus and patient/physician centricity," analyst Baum said.

Even within AbbVie's portfolio, the analyst said he thinks the market is underappreciating the commercial potential of both plaque psoriasis drug Skyrizi and rheumatoid arthritis drug Rinvoq.

The analyst said he expected optimal PBM access, given the sizeable Humira rebate and the company's managed market excellence.

Dispelling Citi's earlier fears over the anticipated impact of biosimilars, the Allergan transaction provides a reasonably secure earnings floor and dividend on which the multiple can expand, the firm said.

The valuation is likely to improve, as Phase 3 readouts and revenue from new drugs kick in, it added.

The Price Action

At last check, AbbVie shares were advancing 2.30% to $73.78.

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