Gina joins the CNBC Trading team nation to discuss the stock of Abbvie after upgrade.
Gina is joined by Todd Gordon, managing director of Ascent Wealth Partners , and Seema Mody.
This health-care name could be headed higher.
So say analysts at Atlantic Equities, who upgraded shares of biopharmaceutical company AbbVie on Tuesday to outperform from market perform, saying the company’s tie-up with Allergan and overall growth potential render it “well positioned ahead of the U.S. election.”
AbbVie shares closed at $97.31 on Tuesday, up less than one-tenth of 1%. The stock is up nearly 10% year to date, outperforming the S&P 500 health sector’s roughly 1% loss and the broader S&P’s 3% decline over the same time frame.
While government policy does matter for AbbVie and the rest of the highly regulated health-care sector, this bull case “is actually very specific” to AbbVie, Gina Sanchez, founder and CEO of Chantico Global, told CNBC’s “Trading Nation” on Tuesday.
“They have a tremendous ability to potentially expand the uses of existing products that have already been approved, but also the potential for Humira to get expanded uses as well,” she said. “And, of course, the tie-up with Allergan along with other expanded product pipeline[s]. I think all those things, regardless of the politics, are going to be very, very positive for AbbVie. But … you do have to watch the policy landscape.”
Humira, AbbVie’s top-selling arthritis drug, is a $19 billion per year franchise for the company and is closing in on its patent expiration date, which could become an obstacle to AbbVie’s continued growth. Its $63 billion deal with Allergan, which closed in early May, will give it control over the well-known and profitable cosmetic treatment Botox.
Todd Gordon, managing director at Ascent Wealth Partners, said that while the concern over Humira’s patent “caps its valuation,” AbbVie’s chart suggests the stock is in a position to climb.
“The chart double bottomed at about 65,” Gordon said. “It’s trying to break out right here at about 100 to retest the highs of 125.”
A surge to $125 a share would represent a 28% increase from AbbVie’s closing price on Tuesday.
“The acquisition of Allergan was a great way to diversify revenue streams,” Gordon said. “They have large, private cosmetic drugs like Botox. And then European regulators cleared the deal with the U.S. That’s supposed to happen in a few weeks. So we remain bullish, but again, I’d like to see it kind of continue through 100.”
The SPDR S&P Biotech ETF (XBI), which holds AbbVie, hit a new all-time intraday high in Tuesday’s session and is on pace for its best quarter on record with a 47% gain.
Atory by Lizzy Gurdus