How ABBV Stock Moved Away From Its Peer Group
The drugmaker’s operating numbers are near the top of its class, but its stock performance is lagging the pack. Is the market seeing a risk that the fundamentals are missing?
In the world of big pharma, AbbVie (ABBV)’s stock is a puzzle. The company delivered revenue growth of 10.4% and a stellar 34% operating margin over the last year. Compare that to peer Merck, which grew revenue at 4.6% with a 10.5% margin. Yet Merck’s stock returned +67%, more than double AbbVie’s +30% gain. The comparison is indicative of a larger pattern. AbbVie’s stock has moved far away from where its fundamentals rank in its own competitive group. Has the price simply fallen behind the numbers, or is the market already pricing in a real risk to the business?
AbbVie’s fundamentals rank near the top of its class.
By the numbers, AbbVie is a strong performer. Its revenue growth and operating margin both rank second out of six key peers, trailing only the meteoric results from Eli Lilly. Yet its twelve-month stock return ranks a distant fifth. Even Johnson & Johnson, with slower revenue growth of 8.1%, saw its stock return +54%, easily outpacing AbbVie. The company’s operational strength is clear, with management reporting that it “delivered another excellent quarter” with robust sales growth of 10.2%.
This performance is powered by its immunology and neuroscience portfolios. Sales of the immunology drug SKYRIZI and RINVOQ each grew 24%. The company’s stock, however, doesn’t reflect this operational ranking. It trades at 70.1 times earnings, a premium valuation, but without the premium stock performance that has rewarded its peers.
| ABBV | JNJ | PFE | MRK | BMY | LLY | |
|---|---|---|---|---|---|---|
| Market Cap ($ Bil) | 442.4 | 625.4 | 151.7 | 322.1 | 129.9 | 1,084.3 |
| PE Ratio | 70.1 | 29.7 | 35.0 | 101.5 | 14.0 | 40.6 |
| LTM Revenue Growth | 10.4% | 8.1% | -0.2% | 4.6% | 3.1% | 50% |
| LTM Operating Margin | 34% | 27% | 27% | 10.5% | 28% | 50% |
| 12M Stock Return | 30% | 54% | 15.9% | 67% | 45% | 96% |
The market is pricing in future competitive threats.
This disconnect isn’t happening in a vacuum. The market is looking past today’s strong results and pricing in the risk of future competition. On its latest earnings call, analysts pressed management on the durability of its key franchises. Questions centered on the competitive “dynamics in psoriasis” for SKYRIZI and how the company views its prospects in an “increasingly crowded development landscape” for new indications.
This is the honest catch. The market’s skepticism is rooted in a legitimate business concern: that the very drugs driving today’s outperformance will face tougher competition tomorrow, potentially eroding the high growth and margins investors see today. Some analysis suggests that AbbVie’s future growth is becoming highly concentrated, making these competitive questions even more critical. For investors who prefer a diversified approach, a broad healthcare ETF like XLV offers exposure to the entire sector.
The Parkinson’s portfolio provides the next major test.
AbbVie’s answer to this challenge is to build new, durable growth platforms. The company recently announced the acquisition of Apogee Therapeutics, a move management said will add even more depth to its robust pipeline in immunology. But the most immediate and visible test of this strategy lies in its neuroscience division, specifically with its emerging Parkinson’s disease franchise.
Management has high hopes for this area, stating it expects its Parkinson’s portfolio to achieve “more than $5 billion” in peak sales. The key watchable for investors is the upcoming U.S. approval and launch of a key drug candidate, a new treatment for the motor symptoms of the disease, expected in the third quarter. The early ramp of this drug will offer the clearest signal yet of whether AbbVie can build its next major growth engine and prove to the market that its fundamentals, not its stock price, have the story right.
To keep score on this group beyond today, our full peer-by-peer dashboards for ABBV track the whole lineup, metric by metric.
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