AbbVie (NYSE:ABBV) will report earnings before the market opens on Wednesday, Feb. 3, 2021. The biopharmaceutical giant is expected to post earnings per share and revenue that mark both a sequential and year-over-year gain. The company is also expected to issue forward guidance that suggests 2021 will continue this growth trend.
But you wouldn’t believe it by looking at the stock price. ABBV stock has been falling since reaching a nearly three-year high in mid-January. However the dip in the biopharma stock is easily explained.
AbbVie Recently Began Trading Ex-Dividend
First, the company’s ex-dividend date passed on Jan. 14. An ex-dividend date is the first date that a company’ s stock trades without the dividend. Any shareholder that is on record by the ex-dividend date receives the upcoming dividend. Those that aren’t will not. That’s why the period immediately preceding the ex-dividend date can be a time when a company’s stock goes up.
However, it’s 2021 and there are many active day traders that likely availed themselves of a dividend capture strategy. This allows them to buy the stock before the ex-dividend date and sell it immediately afterwards. They still collect the dividend, but don’t maintain a long position in the stock.
But dividend capture doesn’t explain the nearly 10% drop in ABBV stock. For that we have to blame recent events.
Quality Stocks Are Not Immune From the Short Squeeze Story
There have been an awful lot of shenanigans in the market. Many investors are looking at the low-price penny stocks, but the fallout is spilling over into quality stocks as investors scramble to cover short positions. It’s likely that AbbVie has been one of those stocks.
I presume this is true because the nearly 8% decline in ABBV stock is almost identical to the drop in the share price of companies such as Advanced Micro Devices (NASDAQ:AMD), Apple (NASDAQ:AAPL) and Tesla (NASDAQ:TSLA). You may argue that correlation doesn’t mean causation, but in this case I would beg to differ.
Humira Continues to Deliver
With any biopharma company, investors need to pay careful attention to the pipeline. In the case of AbbVie there was some concern about the upcoming expiration on its lead drug, Humira. The drug already has biosimilar (i.e. generic) competition outside the United States. And if you’re looking to make a bearish argument, you can point to the nearly 10% decline in international sales of Humira in the last quarter.
However the company still holds the patent in the United States for the next couple of years. And domestically, Humira is still driving sales. AbbVie saw domestic sales increase by 8% which meant the company had global sales growth of 4%.
And it’s not like the company is sitting idly by. The company acquired Allergan (NYSE:AGN) in May 2020 and will see the benefit of that partnership. For example, Allergan recently announced a warrant agreement with Cypris Medical, a privately held medical device company. The agreement will help expand AbbVie’s portfolio of “facial aesthetics” products that includes Botox Cosmetic.
By Any Measure AbbVie Is a Buy
If you want to measure the company by the numbers, AbbVie continues to outperform the broader market last year. In the last twelve months, ABBV stock is up nearly 24% and that includes its recent dip.
When you look at its performance among other large-cap pharma sector stocks, AbbVie is a clear winner again. The stock’s 24% performance dwarfs the rest of the sector’s 7% growth.
And, its dividend is unassailable. First, Abbvie’s dividend yield of 5.09% (as of this writing) is more than double the industry’s 2.3% average. And a closer look at its sector shows the company has a higher yield than Eli Lilly (NYSE:LLY) with a yield of 1.63% and Pfizer (NYSE:PFE) with a yield of 4.36%.
The Dividend Aristocrat has had 49 consecutive years of growing its dividend, which means it’s knocking on the door of joining the even more elite club of Dividend Kings. Those are companies with at least 50 consecutive years of growing their dividends.
2021 is starting out to be every bit as volatile as its predecessor. At some point, the risk-on trade is going to become a flight to quality and safety. You get both with ABBV stock. And with a pre-earnings dip to boot, the picture doesn’t get to look much better.Leave a comment