Hook & thesis
AbbVie (ABBV) plunged after results on 02/04/2026 despite beating top- and bottom-line expectations; the market appears to be punishing the company for the structural decline of Humira without giving full credit to the much faster growth coming from Skyrizi and Rinvoq. That reaction is an opportunity: the business still generates near $20 billion of free cash flow annually, supports a nearly 3% dividend yield, and is trading below prior intraday resistance after a sharp one-day move. We think the sell-off embeds downside that is already reflected in the price, making a disciplined long setup attractive.
In short: buy on weakness with a clear stop - the market is pricing transition risk as existential when the data suggests a durable franchise and strong cash generation that will fund dividends, buybacks, and pipeline investments.
Business summary - why the market should care
AbbVie is a large research-focused pharmaceutical company with a legacy in immunology (Humira) and a growing, higher-margin newer portfolio anchored by Skyrizi and Rinvoq. The company also participates in oncology, neuroscience, and virology. Investors should care because AbbVie is transitioning from Humira dependency to a diversified immunology platform that is scaling quickly; success here determines revenue durability and margin profile for the next decade. At the same time, AbbVie is a major cash generator with a long dividend history and the financial flexibility to monetize future pipeline wins or make bolt-on acquisitions.
Key facts and what happened in Q4
- Q4 2025 sales: $16.62 billion - beat consensus.
- Adjusted EPS: $2.71 - up 25.5% year-over-year and ahead of expectations.
- Immunology revenue +18.3% year-over-year, driven by Skyrizi (+32.5%) and Rinvoq (+29.5%).
- Humira sales declined 25.9% as expected in the post-patent landscape.
- Free cash flow: roughly $19.684 billion (latest reported figure).
- Market cap: about $388.1 billion; current price near $217.74 after the pullback.
The market fixated on the Humira decline and softness in aesthetics, pushing shares down even though the business beat estimates and guidance implied a constructive outlook for 2026 adjusted EPS of $14.37 - $14.57. That dichotomy is important: Q4 showed the new-growth engines are real and large enough to offset a material but predictable Humira erosion over time.
Valuation framing
At roughly $388 billion market cap and a current price around $217.74, AbbVie trades at a premium on headline multiples that reflect the company’s cash generation and dividend. Key valuation touchpoints:
- Reported P/E (snapshot): around 91x per one data point and an alternate measure in the ratios table of ~160x (disparate metrics can appear due to timing or different EPS definitions). Either way, headline multiples are elevated if you use trailing GAAP earnings. But that masks cash-based valuation dynamics: enterprise value is about $447 billion and EV/EBITDA sits near 19.8x; price-to-free-cash-flow is roughly 19.5x.
- Free cash flow of nearly $20 billion implies the company turns significant cash that can sustain the dividend (yield ~3.0%) and repurchases even while reinvesting in growth and the pipeline.
Put simply: on an earnings multiple basis the stock looks expensive near-term if you anchor only to trailing EPS. But on cash-flow and enterprise multiples the valuation is reasonable for a large-cap, cash-generative pharma in active transition. The sell-off reflects short-term narrative risk more than a change in the long-term cash-generating capacity.
Technicals and market structure
- Current price near $217.74; 50-day SMA around $224.49 and 10/20-day SMAs near $221.26 and $220.71 respectively. Short-term moving averages are flattening after a sharp gap down.
- RSI ~43 - not oversold but below neutral, leaving room to move higher without being stretched.
- MACD shows a bullish histogram and momentum attempting to stabilize.
- Short interest is modest relative to float: roughly 22 million shares on last reported settlement with days-to-cover under 3.0 - this means short covering could accentuate rallies but isn’t likely to force a squeeze.
Trade plan (actionable)
| Action | Price |
|---|---|
| Entry | $210.00 |
| Stop Loss | $193.00 |
| Target | $240.00 |
| Time horizon | mid term (45 trading days) |
| Risk level | medium |
Rationale: $210 is a pragmatic entry near recent intraday weakness and below the 10/20-day SMAs, offering a controlled risk point and better reward if the market reassesses the growth story. Stop at $193 protects capital under a clearly defined technical breakdown and captures the scenario where market sentiment shifts materially worse. The $240 target sits below the 52-week high of $244.81 and represents a reasonable mid-term recovery if investors refocus on cash flow and immunology growth.
Why this trade can work
- Fundamentally the business continues to produce robust free cash flow (~$19.7B) and beat on Q4 results, driven by 18.3% growth in immunology and >30% growth in Skyrizi.
- Dividend yield ~3.0% and a long history of increases make the stock appealing to income-focused investors when the headline drama subsides.
- Technical indicators are showing stabilization after the gap down; RSI and MACD are not signaling extended overbought conditions.
- Short interest and days-to-cover are not extreme, limiting the risk of a dramatically disproportionate short squeeze but allowing for constructive momentum if sentiment flips.
Catalysts (what will help this trade)
- Analyst revisions that re-rate AbbVie’s growth profile after investors digest the split between Humira decline and Skyrizi/Rinvoq growth.
- Positive pipeline or M&A announcements that reinforce growth optionality or bring near-term revenue upside.
- Better-than-expected commentary on 2026 guidance or margin trajectory at upcoming investor events or in the FY guide cadence.
- Renewed institutional buying after the Q4 shock fades, particularly dividend-focused funds seeing the 3% yield as attractive.
Risks and counterarguments
- Execution risk on Humira transition: If Humira decay accelerates beyond current expectations and new-product uptake fails to cover the gap, revenue and margin pressure could persist and keep multiples under pressure.
- Competition and pricing pressure: Skyrizi and Rinvoq face aggressive competition in immunology (and pricing scrutiny globally); slower-than-expected market share gains would impair the growth thesis.
- Valuation compression: The stock’s headline P/E and EV multiples are elevated in some measures; any downgrade in growth assumptions could force a meaningful multiple contraction even with stable cash flow.
- Macroeconomic/market risk: A broad risk-off in equity markets or rotation away from healthcare could push AbbVie lower temporarily, making the mid-term horizon vulnerable to macro shocks.
- Counterargument: The market may be right to apply a higher bar to AbbVie because legacy declines in Humira are very large and the growth from Skyrizi/Rinvoq, while strong, might not be sufficient to maintain previous revenue peaks. If management signals more conservative reinvestment or if regulatory setbacks occur, the valuation gap can widen further and the stock may not recover to $240 in the proposed horizon.
What would change my mind
My bullish trade will be invalidated if the company provides updated guidance or commentary that implies materially slower uptake of Skyrizi/Rinvoq than the 32.5%/29.5% growth rates seen in Q4, or if free cash flow guidance meaningfully deteriorates. A confirmed acceleration in Humira erosion beyond current expectations or an unexpected major legal/regulatory setback would also force me to exit and reassess.
Conclusion
AbbVie’s Q4 results on 02/04/2026 delivered beat-and-raise characteristics on the top and bottom line, yet the stock sold off as the market fixated on Humira declines and aesthetic weakness. That reaction feels overdone given the company’s cash generation, dividend profile, and accelerating new-product revenue. A disciplined long entry at $210 with a $193 stop and a $240 target over a mid-term (45 trading days) horizon offers an attractive and defined risk-reward. Maintain discipline: respect the stop and re-evaluate if company guidance or market structure changes materially.
Key points
- Q4 sales $16.62B and adj. EPS $2.71; immunology growth +18.3% led by Skyrizi and Rinvoq.
- Free cash flow near $19.7B supports dividend and capital allocation flexibility.
- Entry $210 / Stop $193 / Target $240 - mid-term trade (45 trading days) - medium risk.
- Major risks: Humira erosion, competitive pressure, valuation compression, macro shocks.