Credit Suisse Downgrades Abbvie (ABBV) to Neutral; Path to Upside Difficult
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Credit Suisse downgraded Abbvie (NYSE: ABBV) from Outperform to Neutral with a price target of $60.00 (from $70.00), saying while valuation may be compelling the path to upside is difficult.
Analyst Vamil Divan commented, "We downgrade ABBV shares to Neutral and lower our target price to $60 (from $70). ABBV has a strong near-term growth profile and a 4.4% dividend yield, but we are increasingly concerned about Humira's longevity given the more challenging payer environment and increasing calls for greater pricing transparency. While we expect these overhangs to only continue to grow, we see the catalyst profile for key pipeline assets as relatively limited in the coming months and we do not expect meaningful near-term upside from business development following the PCYC and Stemcentrx deals. Our bull/bear scenario analysis suggests a bull case valuation of $77 but a bear case valuation of $43, highlighting what we believe is a balanced risk/reward at current levels. We lower our blended (75% DCF/25% relative) base case 12-month target price to $60 (from $70) based off 75% DCF ($60 on cash flows to 2026E, -1% terminal growth and 7.5% WACC) and 25% relative valuation ($60 on 11.0x 2017 EPS of $5.47)."
Shares of Abbvie closed at $57.60 yesterday.
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