Top Affordable Healthcare Stocks: AbbVie and Pfizer Insight
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Healthcare Sector Resilience
The healthcare sector has historically proven to be a resilient area for investors. Companies operating within this space typically offer life-saving medicines, devices, and solutions that are essential to consumers, regardless of the state of the economy. The stability in demand for healthcare products and services makes healthcare businesses an advantageous addition to a well-rounded investment portfolio across various market conditions.
Attractive Healthcare Stocks
If you are on the lookout for healthcare stocks that are currently trading at attractive valuations, there are two names worth considering: AbbVie and Pfizer.
1. AbbVie
AbbVie (NYSE: ABBV) has experienced a slowdown in growth following the loss of patent exclusivity for its top-selling drug, Humira. Nonetheless, the company has strategically positioned itself to mitigate the financial repercussions anticipated from this change. While AbbVie is expected to undergo a transition phase over the forthcoming quarters as the decline in Humira sales becomes apparent, it hosts several blockbuster drugs and has a promising pipeline that long-term investors should weigh seriously before making their investment decisions.
AbbVie's portfolio includes several high-performing drugs such as Venclexta, an important treatment for blood cancer, alongside immunology medications like Skyrizi, which addresses plaque psoriasis, psoriatic arthritis, and Crohn's disease, and Rinvoq, which treats conditions such as eczema and rheumatoid arthritis. Revenue for these three drugs achieved impressive year-over-year growths of 11.5%, 44.8%, and 55.8% respectively, just in the last quarter.
The company also introduced newer drugs, including Vraylar for treating schizophrenia and bipolar disorder, and migraine medications Ubrelvy and Qulipta, all benefiting from double-digit revenue increases. In the most recent quarter, AbbVie's overall revenue surged over 4% year-over-year to $14.5 billion, while net earnings reached $1.4 billion.
In addition to progressing its drug development, AbbVie has made significant acquisitions, including Celsius Therapeutics and Cerevel Therapeutics. The addition of Celsius injected multiple new candidates into its pipeline, potentially yielding a first-in-class investigational drug for inflammatory bowel disease, while the acquisition of Cerevel enhanced AbbVie's neuroscience portfolio with Emraclidine, a prospective next-generation antipsychotic currently in clinical trials.
Another compelling factor for investors considering AbbVie is its dividend, which has consistently increased over time. Over the past five years, AbbVie’s dividend leapt by 45%. The company's current yield approximates 3%, roughly twice the average yield of stocks listed on the S&P 500. This strong history of dividend growth coupled with a stable business outlook makes AbbVie a stock worth further consideration.
2. Pfizer
Pfizer (NYSE: PFE) presents another appealing opportunity, currently trading at a price-to-sales (P/S) ratio of 3. Following a tremendous surge during the pandemic driven by unparalleled sales of its COVID-19 vaccine and antiviral treatment, Pfizer's growth metrics have begun to normalize.
This normalization, however, does not imply stagnation for Pfizer. The company has effectively channeled the profits from its COVID-19-related sales into internal development projects and strategic acquisitions. Recently, Pfizer has completed various acquisitions, including Biohaven Pharmaceuticals, known for its migraine medication Nurtec, and Arena Pharmaceuticals, which specializes in immuno-inflammatory drugs, along with oncology leader Seagen.
Among these acquisitions, the Seagen deal could contribute an estimated $10 billion in annual revenue by 2030, alongside introducing a suite of blockbuster oncology drugs to Pfizer’s already substantial portfolio. This acquisition not only expands Pfizer's pipeline but also includes already approved oncology treatments, increasing its market presence in cancer care.
Despite a reduction in COVID-19-related sales, Pfizer managed to generate over $55 billion in revenue over the last year, complemented by an operating cash flow of around $8 billion. Although the stock has seen some declines recently, Pfizer remains steadfast in its commitment to maintain its dividend, which has soared to near 6% yield, significantly higher than the S&P 500's average of 1.5%. Notably, Pfizer’s dividend payout has grown by approximately 17% within the past five years.
With a robust 175-year history, Pfizer has resiliently weathered various business cycles. There’s little reason to believe that this transitional period, following its pandemic highs, will diverge from that historical trend. Investors may find it advantageous to seize an opportunity to invest while the stock is priced below traditional valuations.
Investing Considerations
Before making an investment in AbbVie or Pfizer, it is vital to evaluate your financial goals, risk tolerance, and the potential for these stocks to fit within your overall investment strategy. Both stocks offer unique strengths and possible growth trajectories that could align well with an investor’s long-term objectives.
Frequently Asked Questions
What makes AbbVie a good investment opportunity?
AbbVie has a diverse portfolio of blockbuster drugs, a strong dividend history, and promising future growth potential due to new product developments and acquisitions.
How has Pfizer adjusted post-pandemic?
Pfizer has shifted its focus towards internal development and strategic acquisitions following the normalization of revenue post-pandemic, aiming to maintain growth momentum.
What is the current dividend yield for AbbVie?
AbbVie currently demonstrates a dividend yield of approximately 3%, which is quite attractive compared to the average stocks in the market.
Why is the healthcare sector considered resilient for investments?
The healthcare sector typically demonstrates strong demand during economic fluctuations, making it a safer investment avenue for many investors.
What should investors consider before investing in these stocks?
Investors should assess their financial goals, risk appetite, and how either company fits within their overall investment strategies before making purchases.
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