A better pick
AbbVie (ABBV) is down 14.69%, and Allergan (AGN) is down 13.41% in 2019 on a YTD (year-to-date) basis. While concerns about the anticipated generic erosion of its flagship Humira franchise have proved to be a drag for AbbVie, Allergan is being increasingly criticized for its clinical and commercial setbacks and acquisition strategy by investors, including activist hedge fund Appaloosa Management. Since both companies are trading at much lower valuations than their historical levels, let’s evaluate their pros and cons to determine which could be a better pick in the long run.
Analysts’ recommendations and target prices
The consensus recommendations for AbbVie and Allergan are a “hold” and a “buy,” respectively.
Wall Street analysts expect a potential upside of 14.52% for AbbVie based on the company’s closing price on June 17. Analysts have gradually reduced the company’s 12-month consensus target price from $92.18 in March and April to $90.50 in May and $90.07 in June. Its highest and lowest target estimates are $115 and $78, respectively.
Of the 17 analysts covering AbbVie, one recommends a “strong buy,” three recommend “buys,” 11 recommend “holds,” one recommends a “sell,” and one recommends a “strong sell.”
Wall Street analysts expect an upside potential of 49.36% for Allergan based on the company’s closing price on June 17. Analysts have gradually reduced the company’s 12-month consensus target price from $184.29 in March to $182.16 in April, $178.84 in May, and $172.86 in June. Its highest and lowest target estimates are $255 and $125, respectively.
Of the 26 analysts covering Allergan, six recommend “strong buys,” eight recommend “buys,” 11 recommend “holds,” and one recommends a “sell.”
Share price movements and valuation
On June 17, AbbVie closed at $78.65, 0.05% lower than the previous day’s close, 6.56% higher than its 52-week low of $73.81, and 21.53% lower than its 52-week high of $100.23. The company’s market cap is $116.66 billion and its PE, forward PE, PEG (PE-to-growth), PS (price-to-sales), and PC (price-to-cash) ratios are 22.24x, 8.32x, 3.28x, 3.57x, and 22.31x, respectively.
On June 14, Allergan closed at $115.73, 0.16% lower than the previous day’s close, 0.47% higher than its 52-week low of $115.19, and 41.25% lower than its 52-week high of $197.00. The company’s market cap is $39.66 billion, and its forward PE, PS, price-to-book, and PC ratios are 6.74x, 2.52x, 0.62x, and 22.20x, respectively.
Compared to Allergan, AbbVie is trading at higher forward PE, PS, and PC ratios.