In the midst of the continued corona pandemic, shifting restrictions on travel and new developments in healthcare, check out my stock picks! And, if you feel up to it, feel free to tear them apart.
AbbVie is an attractive stock right now for a multitude of reasons and one that I’m, honestly, quite excited about!
To be fair, I can understand hesitance about AbbVie Stock. The stock has recovered to pre corona pandemic levels to nearly $100, rising 55% since its dip in mid-March. Still, due to the company’s aggressive portfolio expansion, I see significant room for growth.
Amid the corona pandemic, it acquired Allergan in May for $63 billion. Some of you might recognize the latter as a lead producer of medical aesthetic products, like Botox, Juvéderm, and CoolSculpting. And even during a pandemic, reports have come out that there have been sharp increases in patients seeking plastic surgery or facial enhancement-likely due to new remote policies allowing patients to recover at home and the ability to hide swelling/bruises via face masks. Combined with the fact that minimally invasive plastic surgery procedures have been sharply increasing, projected to grow at a CAGR of 7.8% by 2023, in part due to constant promotion by internet celebrities and social media, AbbVie has just expanded potential revenue sources significantly. And now, as we recover from the shutdowns implemented in March, these products are likely to bolster AbbVie’s overall earnings.
The company has further worked to diversify offerings by partnering with biotechnology company Genmab to focus on developing cancer treatments, sending the stock price soaring when news broke in June. The company also submitted applications to allow use of Rinvoq, a proven treatment for rheumatoid arthritis in June. If approved, due to their success with Humira, and, by extension, their built-in fan base from the latter, overall sales will increase due to a new patient base.
Since the company is currently heavily reliant on blockbuster arthritis drug, Humira, which makes up nearly 60% of its sales, the fact that AbbVie is investing so heavily in alternative revenue sources will negatively impact profitability in the short run, due to cost of acquisition and R&D, but allow it to consistently increases sales through its expanded product portfolio.
For shareholders in it for the long haul, Delta stock is particularly attractive.
Part of this is that in contrast from United Airlines’s CCO mocking passengers who asked for social distancing or American Airlines filling flights to capacity, Delta CEO Ed Bastian’s commitment to public welfare and safety, even at the cost of profits, when he declared during a July earnings call that the company would cut out middle seats is surprisingly admirable and something that will be remembered by consumers when the travel industry inevitably rebounds. Also, who likes middle seats? Exactly.
Now, if you are looking for a short-term profit, Delta isn’t the right stock for you. Profits have plunged 88% due to the impact of novel coronavirus on air travel. And even Bastian admitted that it could take two years for the company to recover. At the same time, many countries have issued travel bans due to the virus, further cutting down potential profit for those willing to risk flying.
Still, the stock is trading at 50% less than it was pre-corona (when it dropped from $55 to a mid March low of $21), showing significant room for growth once the industry recovers. With a host of Covid vaccines in various stages of trials, Delta, widely considered the best airline stock with the most cash at hand, is best positioned to wait out the current hits to the industry and rebound as travel restrictions are lifted. In fact, many countries have lifted bans as of late though there are still restrictions and reservations towards air travel.
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