Will Abbott Stock Rebound To Its 2022 Highs?

Abbott stock (NYSE: ABT) currently trades at $106 per share, over 10% below its level in March 2021, and it has the potential for sizable gains. Abbott saw its stock trading at around $109 in late June 2022, just before the Fed started increasing rates, and is marginally below that level. The stock has gained 10% since September 2022 compared to the S&P 500, which gained about 23% during this period. The rise in ABT stock over the recent past can be attributed to an expected uptick in total procedures volume, aiding its medical devices business. Recently, UnitedHealth’s management stated that their medical costs may be high in the near term as more elective procedures are being performed. Still, ABT stock has underperformed in the broader markets in recent months. This can be attributed to rising concerns about a potential recession and its impact on Abbott’s businesses. The decline in Abbott’s revenues over recent quarters has also contributed to the stock’s underperformance. The U.S. FTC is also investigating Abbott along with a few other companies that make baby formula for collusion to win state contracts.

Returning to the pre-inflation shock level of $141 means that ABT stock will have to gain 33% from here. However, we do not believe that will materialize any time soon and estimate Abbott’s valuation to be around $122 per share, implying about 15% gains. This is because of a decline in sales and earnings in the near term after a pickup in the diagnostics business during the pandemic. Abbott’s operating margin has contracted from 19.6% in 2021 to 16.8% now. Our Abbott Operating Income Comparison dashboard has more details. Still, from a valuation perspective, ABT stock appears to have room for growth from its current level of $106.