Abbvie Just Had A Huge Week, But It's Not Over

• AbbVie Inc ABBV shares are up 8 percent in one month, despite touching a low of $46.92 on October 22.
• Morgan Stanley’s David Risinger upgraded the rating on the company from Equal-Weigh to Overweight, while raising the price target from $62 to $73.
• With an increase in EPS growth estimates, AbbVie is now the cheapest large-cap pharma with superior long-term prospects, Risinger commented.

AbbVie’s shares gained 10 percent on October 30, after a webcast of management’s long-term plan. Analyst David Risinger said, however, that the stock has “considerably more room to go.”

“Mgmt's robust defense of the broad Humira patent estate, including putting a stake in the ground for the strength of 2020 patents, combined with our own patent consultant's views, give us conviction to raise our projections,” Risinger wrote.

The revenue estimate for 2020 has been raised from $30B to $35B, which has driven the EPS estimate for the year from $6.98 to $8.83. This takes the 4-year EPS CAGR for 2016-2020 from 8 percent to 15 percent.

Risinger expects greater Humira durability to offer compounded benefits:

1. More time for Abbvie to progress its own pipeline
2. Increased financial flexibility

“The 5-year free cash flow estimate has been raised from $46B to $55B. “We believe Abbvie should be able to leverage its strong cash flows to pursue acquisitions to help offset eventual biosimilar Humira erosion,” the analyst mentioned.

He added that if the company buys pipeline assets at 4-5x peak sales, it could generate $7-$9B in future sales, offsetting Humira franchise declines from the 2019 peak sales estimate of $18B.