What happened
Shares of Abbott Laboratories (ABT +1.33%) were jumping 7.6% higher as of 10:53 a.m. EST on Thursday. The big gain came after Raymond James analysts upped the price target for the stock to $126, reflecting a premium of more than 10% to Abbott's closing price on Wednesday.
So what
Investors shouldn't put too much emphasis on analysts' price targets. However, it's prudent to understand why analysts like (or dislike) a particular stock.
Image source: Getty Images.
In this case, Raymond James analysts are more bullish about Abbott Labs because of the company's fourth-quarter update on Wednesday. Abbott posted strong Q4 results, but the analysts were even more impressed with the healthcare giant's guidance for 2021. Abbott thinks that it will deliver earnings-per-share growth of more than 35%.
This surprisingly confident earnings guidance stems from Abbott's optimism about its COVID-19 testing business. It's the biggest growth driver for the company right now. Raymond James analysts also expect that the rest of Abbott's business, including medical devices, will benefit as worries about the COVID-19 pandemic subside this year.
Now what
How the pandemic plays out in 2021 will be important to Abbott's near-term fortunes. Even with vaccines becoming more widely available, though, it's likely that the company will continue to make a lot of money from its COVID-19 tests.
Raymond James analysts wrote to investors that "Abbott remains one of the more attractive growth stories in large-cap healthcare with a diversified portfolio that addresses various end markets and geographies." Whether or not the healthcare stock achieves the price target remains to be seen, but that view of Abbott appears to be spot on.
