Every day, Wall Street analysts upgrade some stocks, downgrade others, and "initiate coverage" on a few more. But do these analysts even know what they're talking about? Today, we're taking one high-profile Wall Street pick and putting it under the microscope...

AbbVie (NYSE:ABBV) shareholders are in a funk. Their stock recently reported fiscal 2016 results showing sales up 12% and profits rising 16%, but the stock is up only 15% over the past year, lagging the S&P 500's performance by more than 4 percentage points.

And yet, Goldman Sachs thinks there's still hope. Emerging from the Cowen healthcare conference in Boston this week, Goldman wasted no time in upgrading AbbVie stock from mere buy to "conviction buy," and assigning a new price target of $80 a share. Now why did it do that?

Here are three things you need to know.

Assorted pills in pillboxes.

Which of these pillboxes contains most of AbbVie's profits? Image source: Getty Images.

1. One of the most compelling values in healthcare

TheFly.com explains in a write-up this morning that Goldman believes AbbVie stock is "one of the most compelling values across healthcare coverage, let alone US pharma." And Goldman bases this conclusion primarily on just one thing: The incredible ability of AbbVie's Humira arthritis drug to create cash.

According to the analyst, this single drug alone has the potential to generate "approximately $60B" in positive cash flow for AbbVie over the next five years.

2. An astonishing claim

That's more than a little impressive. Over the past five years, S&P Global Market Intelligence data show how AbbVie's cash flow has had endured substantial bumps, and some amazing rises as well. From 2011 to 2013, cashflow at the company averaged around the low $6 billion level before plunging nearly 50% in 2014. AbbVie's cashflow then quickly rebounded -- more than doubling in 2015, before declining only a bit in 2016 to where it now sits: $7 billion in cash generated.

Thus, Goldman Sachs' projection of $60 billion in five years suggests we'll soon see AbbVie nearly double cash production from Humira to $12 billion per year, on average -- plus whatever AbbVie's other drugs, including Imbruvica for cancer and Viekira for hepatitis C, can produce.

3. What it means in dollars and cents

So what does this mean for investors? Let's assume Goldman Sachs is right for a moment. Let's even go so far as to discount all the rest of AbbVie's cash flows, and value the company simply on Humira. (Note: According to Goldman's analysis, Humira alone is responsible for about two-thirds of the entire value of AbbVie.)

A total of $12 billion in annual cash flow, minus AbbVie's relatively stable level of capital spending (about $500 million per year or so), leaves us with a stock generating at least $11.5 billion in annual cash profits. Analysts project 12% annual earnings growth at AbbVie over the next five years, and the company also pays a 4% dividend (thus a 16% total return). So we'd ordinarily expect a stock with these attributes to sell for about 16 times free cash flow, or $184 billion. (And if you factor in the value of the rest of AbbVie, that valuation could rise by a further 50%.)

Instead, AbbVie stock has a market capitalization of just $103 billion, and even with net debt included, an enterprise value of only $133 billion.

Long story short: Goldman Sachs appears to be right in calling AbbVie a "compelling value."

Final thing: But what if they're wrong?

What could go wrong with this buy thesis? Fellow Fool Keith Speights laid out the bear thesis for us late last year, and the news here is not good: Goldman Sachs sees Humira as the key reason for buying AbbVie. But Keith calls "the threat to Humira ... AbbVie's chief worry."

Cash profits attract competitors like chum attracts sharks, and AbbVie's rivals are circling. In Europe, Biogen (NASDAQ:BIIB) is already marketing drugs "biosimilar" to Humira. Here in the U.S., Amgen (NASDAQ:AMGN) wants to break Humira's patents, and subject Humira to similar attack. The key patent protecting Humira expired last year, and while AbbVie says it has more than 100 other patents it can use to fend off potential biosimilar manufacturers such as Biogen and Amgen, success is not assured.

So where does this leave investors? Worst case, AbbVie says Amgen's patent challenge won't go to trial until November 2019. It could drag on for months, and then the appeals process could postpone a final resolution for years. That might give AbbVie time to collect all $60 billion-worth of the cashflow that Goldman says Humira can produce over the next five years.

But once the legal hurdles are overcome, and Humira opens up to widescale competition from generics? We could soon have a Gilead Sciences scenario on our hands here, folks, and AbbVie's cashflow could plunge once again.

Caveat investor.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.