(MENAFN- Baystreet.ca) AbbVie (NYSE:ABBV) is a long way away from the $65 bottom reached in August. Its latest earnings report changed investor sentiment but this happened well before the company shared the numbers. At this pace, ABBV stock could trade in the $95 - $100 within a few months.
Debt Raise
AbbVie will sell $28 billion worth of debt to fund the Allergan (NYSE:AGN) buyout. This is a debt offering size not seen since CVS bought Aetna. Previously, markets shunned the deal. Today, markets praise the deal because of the growth potential from the merged firms.
AbbVie will cut costs, replenish its pipeline, and expand its potential drugs through higher R&D. And the risk is lower than ever in growing in this way.
Interest rate cuts lowered the cost of debt. AbbVie needs only to minimize the drop in Humira sales and to use the cash flow to fund the debt. It needs to continue developing its pipeline of drugs while investing in Allergan's Botox drug to grow overall cash flow.
In effect, investors get a well-managed drug company whose debt is manageable. And while holding the stock, the dividend yield is still in the 5% range, thanks to a recent 10% dividend hike.
Disclosure: Author owns shares of AbbVie.
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