Author: Craig Adeyanju
Estimated read time: 3 minutes
Publication date: 20th Jun 2019 10:00 GMT+1
It's generally been a good year for the U.S. stock market given that just about all major stock indices — S&P 500, Dow Jones Industrial Average, Nasdaq Composite Index and NYSE Composite Index — are up by at least 13%. However, stocks of some well-known companies have had it rough so far this year. It might be time to consider these beaten-down stocks. Note that all stock performance and indicators quoted in this article were as of June 19.
While shares of electric vehicle (EV) maker Tesla Inc. (NASDAQ: TSLA) has been rallying since the beginning of June, its stock price is still down by over 32% year to date. Failed promises are at the heart of Tesla's struggles. First, the electric carmaker failed to report a profitable first quarter despite CEO Elon Musk saying during Q4 earnings call that he was "optimistic about being profitable in Q1, and for all quarters going forward," a forecast that has now been pushed to Q3. Another challenge is that the company has been slow at producing new Model 3 EVs. Also, the company raised about $2.7 billion in convertible debt and equity in May despite Musk saying, last year, that the company wouldn't need to do raise fund.
However, analyst Dan Ives of Wedbush Securities estimates that Tesla will produce 345,000 to 350,000 vehicles, 15,000 to 20,000 short of Tesla's own forecast. If Tesla matches Ives' estimates, it would be the closest the EV maker would be to meeting its own forecasts. That will offer some hope to investors, according to Ives. Investors may want to keep an eye out for its Q2 production report at the beginning of July.
The past 18 months have been a rollercoaster ride for drugmaker AbbVie Inc.'s (NYSE: ABBV) investors, with the stock down by over 36% from the all-time high it attained in January 2018. This year alone, the ABBV stock is down by at about 15%.
Fears over the impending loss of patent protection for AbbVie's top-selling drug Humira is at the core of ABBV’s challenges. The blockbuster drug, which treats autoimmune diseases including arthritis and psoriasis, accounted for nearly 61% of AbbVie's revenue in 2018. While Humira's main patent in the U.S. has expired, AbbVie has a slew of additional patents in the U.S. still protecting the drug until 2023. Drugmaker Momenta Pharmaceuticals (NASDAQ: MNTA) is eagerly awaiting Humira patents expiration in 2023 to launch its biosimilar version, at a lower price.
However, AbbVie isn't folding its arm. The company says it's working on raising its non-Humira sales from roughly $9.5 billion in 2017 to $35 billion in 2025, a figure that would more than offset the lost Humira sales. Its non-Humira sales were about $12.8 billion in 2018. Beyond the growth in non-Humira sales, AbbVie has a pipeline that is ready to deliver, with the company expected to launch two new drugs this year. The two drugs — Upadacitinib and Risankizumab — are expected to generate over $4 billion in sales by 2024.
What's more, ABBV stock is trading 8.9 times expected earnings, compared to 9.9 and 20.44 for competitors Gilead Sciences Inc. (NYSE: GILD) and Eli Lilly and Co. (NYSE: LLY) respectively. Of the three drugmakers, AbbVie pays the highest annualized dividend at $1.07.
Disclaimer: Craig Adeyanju is an experienced financial consultant who writes for Finscreener.com. The observations he makes are his own and are not intended as investment or trading advice.