While Berkshire Hathaway (NYSE:) (BRK.A) doesn’t pay dividends, many of the companies it owns do. AbbVie (NYSE:), a biopharmaceutical company, is among the various income-friendly stocks held by Berkshire.
This Dividend Aristocrat seems to have the makings of a core long-term Warren Buffett holding. Approximately five decades of dividend increases provide a rather impressive track record investors can point to as a key reason to buy. However, there are other catalysts that investors such as Buffett appear to be watching.
Let’s dive into what may have some investors spooked. I remain bullish on ABBV stock for now. (See AbbVie stock charts on TipRanks)
FDA Warning on Arthritis Drug
ABBV stock has seen dramatic declines since the beginning of September. Shares of AbbVie have fallen 11.1% since closing at $120.78 on August 31, after a new arthritis drug witnessed a major setback.
U.S. Food and Drug Administration announced on September 2, that Rinvoq, a drug used for arthritis, will have to carry new additional warnings. These warnings outline risks related to blood clots, and mortality.
This unanticipated warning comes after tests of Xeljanz from rival Pfizer (NYSE:) displayed these risks. With Rinvoq expected to be AbbVie’s latest and greatest cash flow machine, shares have understandably taken a hit.
In fact, as a result of this news, ABBV stock saw its sharpest drop since March 2020.
Reasons to Be Optimistic about ABBV Stock
These warning labels on one of AbbVie’s key drugs are certainly a drawback. In may ways, investors can admit the recent sell-off in ABBV stock was warranted.
However, Rinvoq is one of many AbbVie drugs in the pipeline. Various other drugs, including autoimmune drug Skyrizi, provide investors with optimism. Antipsychotic drug Vraylar is another excellent drug in the company’s pipeline. Additionally, AbbVie has high hopes for two of its migraine medications, Atogepant and Ubrelvy, when they hit the market.
AbbVie will also look to right the ship when it comes to Rinvoq. The company’s management team has an excellent track record of success when it comes to its prospective drugs. Additionally, the FDA did not request additional safety plans or data, a positive sign for investors worried about Rinvoq.
There’s certainly hope that this Rinvoq debacle will be short-term in nature. Looking at ABBV stock holistically certainly sheds a different light on this stock. The company hopes to see significant revenue growth over the latter-half of this decade.
Given the quality of the drugs in AbbVie’s pipeline, that seems like a high-probability scenario.
Wall Street’s Take
According to TipRanks’ analysts rating consensus, ABBV stock is a Strong Buy. Out of 13 ratings, 11 are Buy recommendations and two Hold recommendations.
The average ABBV price target is $128.15. Analyst targets range from a low of $112 per share, to a high of $142 per share.
The Rinvoq news has provided some sharp headwinds for AbbVie to deal with. However, long-term investors taking the longer view of this stock may want to buy the dip. After all, this is an excellent defensive growth play in a market filled with overvalued meme stocks.
AbbVie is a pharmaceutical giant that prints money. The company’s revenue growth looks strong, and this remains a top dividend stock. (A yield of 4.8% is certainly juicy right now.)
Accordingly, investors who stick with this stock, and buy the dips when presented, are likely to do very well over the long-term.
Disclosure: At the time of publication, Chris MacDonald did not have a position in any of the securities mentioned in this article
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