Abbott Labs Vs AbbVie Stock: Which is Best?

Abbott Labs Vs AbbVie Stock: Technological advances make this an exciting time to be in the biopharma field. Developers have better tools to create innovative solutions that amplify the existing capabilities of the human body. Research is faster and more accurate, results can be analyzed more quickly, and most importantly, therapies for a wide variety of diseases and disabilities are now in reach. 

In 2020, much of the world’s biopharma resources have been poured into the prevention and treatment of COVID-19. Biopharma researchers around the globe answered the call to create effective COVID-19 vaccines, and by all appearances, they have succeeded.

In less than a year, a least two vaccines are ready for market – an all-time record in the vaccine industry. 

Though the novel coronavirus has drowned out news of other medical advances, there’s a lot more going on in the biopharma world besides COVID advances.

Among other achievements, ADC Therapeutics is on the cusp of FDA approval for a new B-cell lymphoma treatment, Abott’s FreeStyle Libre 2 diabetes monitoring system gained approval for use in children ages four and up, and AbbVie is preparing an FDA submission for a new method of treating farsightedness. 

Investors want to get on board with biopharma in hopes of profiting from the next big discovery. After all, this is the industry that will someday cure cancer, reverse catastrophic spinal cord damage, and make heart disease a thing of the past.

Even Warren Buffett has gotten interested in the potential of biopharma. In the third quarter of 2020, he reported large purchases of AbbVie (ABBV), Pfizer (PFE), Merck (MRK), and Bristol Myers Squibb (BMY) stock. 

The problem, of course, is how do average investors choose the right biopharma company for their portfolios?

Each has its pros and cons, and any one of the major players could be next to announce an important discovery. The answer is to take the most promising options two-by-two, comparing and contrasting their potential. In this case, Abbott Labs vs AbbVie stock: which is best? 

Is Abbott Labs Stock A Buy?

While Abbott has a long list of products on the market – and even more in its pipeline – this year has been all about COVID-19.

Abbott is a leader in COVID screening kits, which includes a collection of rapid response, molecule lab, and antibody tests.

Thanks to Abbott, millions of patients had critical information on whether they had recently been infected with coronavirus or whether they were presently positive for the virus and possibly contagious. 

There is no doubt that Abbott’s tests saved lives, guiding treatment and preventing spread of the disease, and most industry experts believe those tests will still be in demand once a vaccine is widely available. 

After all, vaccine production and distribution promises to be a long, complex process, and a portion of the population can not or will not choose to participate. Further, it is not yet clear how long vaccine protection will last, making testing an important component of the larger, long-term strategy to contain the virus. 

Abbott announced its third-quarter results on October 21st, and the boost from COVID-19 testing was immediately apparent. Revenues went up by 9.6 percent year-over-year for a total of $8.9 billion, thanks in large part to 38.2 percent growth in the testing and diagnostics segment of the business. 

Abbott Labs Analysts View

Analysts are impressed with Abbott’s potential for growth in the next 12 months, primarily due to its expertise in COVID-19 testing. However, when the pandemic is truly over, all of that technology doesn’t go to waste.

Abbott has made extraordinary advancements in the field of diagnostics and testing through its work on COVID-19. Much of its proprietary knowledge is transferable to testing for other diseases, which may mean strong performance for Abbott long-term. 

Aside from COVID-related advances, Abbott has made important strides in other areas of its business. In addition to diagnostics, the company is active in nutrition, medical devices, and established pharmaceuticals.

For example, on the nutrition side, Abbott owns Similac, Ensure, and Pedialyte, and its diabetes care product line generated $843 million in revenue for the third quarter alone.

Further, Abbott has recently obtained approval for an implantable defibrillator that will add to top-line results next year. 

In short, Abbott’s diverse product lines and leadership position in COVID-19 testing make it a smart buy among biopharma stocks.

Should You Invest in AbbVie?

AbbVie started its life as part of Abbott Labs. It was divested in 2013, to the benefit of both companies. In the eight years since the two companies separated, AbbVie won the Prix Galien Award for Imbruvica, a blood cancer treatment, and it obtained approval for a new therapy to manage uveitis – a disease that can lead to vision impairment.

It gained approval for a new method of treating Hepatitis C, and it acquired Allergen – a leader in neuroscience and owner of the Botox and Juvederm brands. 

AbbVie’s share prices have dropped a bit in 2020, which is surprising to some seasoned investors given its financial success.

For the third quarter, the company reported revenues had increased 52.1 percent year-over-year for a total of $12.9 billion. Earnings per share went up by 21.5 percent to $2.83, and net income rose 22.9 percent to $2.31 billion. 

Meanwhile, AbbVie increased its dividend to 10.2 percent or $1.30 per share effective at the start of 2021. That marks the eighth consecutive year in which AbbVie has raised its dividend – a sign of good things to come for those who choose to invest now.

Risks of Buying Abbott Labs Stock

The biggest risk for Abbott investors is the one that faces all shareholders in this industry. Abbott profits by offering the most advanced healthcare products in its respective markets, but that leadership position is anything but guaranteed.

While Abbott is on top now, the possibility is always there that another company will come up with a more effective, more affordable solution to the problems Abbott products solve. If so, Abbott will be in the unenviable position of playing catch up with its competitors. 

With that said, the consensus among industry analysts is that Abbott is in a solid place for the next year – if not longer.

It has captured the COVID testing market, and it would be difficult – if not impossible – for another company to usurp its position.

Products out of its other divisions are state-of-the-art in terms of technology and scientific advancement. By the time competitors catch up – if they even make the attempt – Abbott Labs will have moved on to something newer, safer, and more effective.  

Dangers of Investing in AbbVie

Investors, including Warren Buffett, have noticed that AbbVie stock is relatively inexpensive these days.

Frankly, the company has been in a slump given the impending competition for its blockbuster drug Humira.

In 2023, AbbVie loses exclusivity as patents expire, and biosimilar drugs are already prepared to capture market share. 

Amgen has Amjevita and Boehringer Ingelheim has Cyltezo – both are ready to go the moment the path is clear. This presents a concern for AbbVie investors, as Humira has been its biggest revenue driver for years. In 2019, Humira was responsible for more than half of AbbVie’s total sales.

AbbVie’s leaders aren’t waiting for competition to decimate revenues before taking action. The acquisition of Allergan shows the company is formulating a strategy for growth beyond Humira.

That could mean greater returns for investors who buy now, as share prices remain low while the market waits for more information on AbbVie’s next steps.

AbbVie Vs Abbott Labs Stock: The Bottom Line

The question of AbbVie vs Abbott Labs stock is a difficult one. Both are strong performers with plenty to look forward to in coming months and years.

AbbVie may be a better choice for those in search of value stock, as it is – for the moment – less expensive than its financials would suggest.

On the other hand, Abbott Labs is more likely to see solid growth in the upcoming year, which makes it a better choice in search of short-term returns. 

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.