We're upgrading our rating on AbbVie amid a false report on the biopharma's guidance

Published Fri, Sep 30 20223:35 PM EDTUpdated Mon, Oct 3 202210:18 AM EDT

In our story Friday summarizing key takeaways from the Club's daily meeting , we briefly mentioned that analysts at SVB Securities lowered the bank's price target on AbbVie (ABBV) to $135 from $140, before then issuing a clarification to their initial research note. We argue that the Club holding stock should not be trading down more than 4% on this questionable price target revision, and instead we're upgrading our rating on the company back to 1. SVB's decision to lower its price target was based on two factors. Firstly, the bank learned that the biopharmaceutical company did not plan to provide its 2023 guidance when it reports third quarter earnings next month. Where 2023 earnings will land has been a point of contention among analysts and investors, as there is still much uncertainty around how precipitously sales will fall once the company's blockbuster multipurpose drug, Humira, loses its patent protection in the U.S. in the second half of next year. It's only expected to be a one-year dip at the company level, but no one is quite sure how deep the 2023 earnings trough will be, hence why the stock trades at such a low multiple. AbbVie shares were down around 4.75%, at $135.94 a share, in Friday afternoon trading. Nonetheless, AbbVie had already said on its second-quarter earnings call that it was unlikely to provide 2023 guidance with third quarter results. SVB analysts appear to have missed this in July, but it's not new information. The second factor in SVB's price target revision was a belief that the company was no longer reiterating its long-term, high single-digit revenue growth target, partly due to uncertainties related to the Inflation Reduction Act. But the bank got that wrong. "We had a follow-up conversation with [the AbbVie investor relations team] following the publication of our report this morning…IR stated that we misinterpreted our prior discussion and that the company did not revise its [long-term] guidance for high single-digit revenue growth," SVB analysts wrote in a clarification note Friday afternoon. We appreciate SVB clearing this up, but the clarification wasn't enough to offset the damage to AbbVie today. It's also quizzical to us that the analysts maintained their new $135 price target, which had been based on incomplete information. We've kept a 2 rating on AbbViefor a long time and have repeatedly taken profits at higher prices – but with shares down more than 4% this afternoon and the company underperforming the market and drug stock group, we think today's pullback is an opportunity. We are upgrading our rating back to a 1 and continue to like healthcare because it's defensive in the current economic slowdown. (Jim Cramer's Charitable Trust is long ABBV. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

Test tubes are seen in front of a displayed AbbVie logo in this illustration taken on May 21, 2021.

Dado Ruvic | Reuters