AbbVie (ABBV -1.04%) is one of the newer pharmaceutical companies to take the market by storm. Spun off in 2013 from its parent company, Abbott Labs, it sits at a tremendous market capitalization of a little over $200 billion. The stock has still about 5% off its all-time highs from 2018, and if AbbVie's recent first-quarter earnings tell us anything, it's that the stock can go even higher. 

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Earnings beat

AbbVie reported its first-quarter earnings last week, and beat analyst estimates on most metrics. AbbVie outperformed on both non-GAAP and GAAP earnings per share by $0.12 and $0.52, respectively. The company was also up 50.9% from 2020 to 2021 in its Q1 revenue, coming in at a little over $13 billion. Although many analysts are still skeptical of AbbVie because of the patent cliff on its biggest drug Humira, it still managed to blow away earnings. So is the fear really warranted?

Pipeline success

Since its spinoff in 2013, AbbVie has had a lot of success with its pipeline. It currently markets the best-selling drug in the world, Humira, which is used to treat illnesses like Crohn's disease, rheumatoid arthritis, plaque psoriasis, and psoriatic arthritis. Humira has held this market-leading position for the past few years, and brought in $19.8 billion in adjusted net revenue in 2020.

To ease concerns about Humira's patent cliff coming in 2023, AbbVie has made acquisitions as well as developments in its own pipeline to diversify and drive growth. In 2019, AbbVie acquired Allergan and its portfolio of products, including Botox, eye care products, and women's health products. 

AbbVie's current immunology portfolio is the biggest driver of annual sales, and includes blockbuster drug Humira as well as up-and-comers Skyrizi to treat plaque psoriasis and Rinvoq to treat rheumatoid arthritis. Both Skyrizi and Rinvoq more than doubled their annual sales from 2019 to 2020.

The company is also diversified across its different business segments, which include immunology, oncology, aesthetics, neuroscience, and eye care. Out of the $34 billion made in 2020, these businesses brought in 52%, 14.6%, 4%, 8.2%, and 4.1%, respectively. Growth from Humira and AbbVie's various businesses has contributed to the recent revenue growth of 47.4% in the last year, as well as an almost 13% revenue growth over the last five years.

The future pipeline for AbbVie includes dozens of filings for indications to treat using drugs Skyrizi and Rinvoq. It also has dozens of other smaller therapeutics being reviewed to treat different types of indications in immunology, oncology, and neuroscience.

The key drivers for AbbVie's future revenue streams will come from Skyrizi and Rinvoq, but products like Imbruvica and Botox will hold steady places in the businesses until those new drugs will be able to drive the bulk of future growth. In a not-too-distant future, AbbVie will not be able to rely solely on Humira to generate a lot of revenue. Its other drugs and businesses look more than ready to carry the company forward.

A buy at these levels

The great numbers AbbVie reported in earnings have contributed to a rise in the stock of almost 7% since the beginning of April. However, AbbVie is still trading at a cheaper valuation than it was a few months back, currently with a forward price-to-earnings (P/E) ratio of just nine. The valuation is much cheaper compared to the nearly 10.4 P/E it was trading for just a few months back.

Taking 2021's projected EPS of $12.52 gives us a share price of $131, offering investors a great opportunity to buy the stock while it's trading at a discount. Growing revenue, pipeline expansion, and a cheap valuation are reasons investors shouldn't wait to pull the trigger on AbbVie. This best-of-breed pharmaceutical company is undervalued at these levels, and with a near 4.3% dividend yield (compared to the SPDR S&P 500 ETF which only yields around 1.32%), investors of all tastes have a reason to buy into AbbVie.