Wall Street’s top analyst says ditch the Magnificent 7 and go all in on these three big pharma stocks
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2024 was a great year for investors whose portfolios included shares of the Magnificent Seven. Big Tech’s surge has created gains, but headwinds are building and some observers doubt the Mag Seven can sustain its momentum into 2025. With that in mind, analysts at Miramar Capital believe it may be time to replace the Magnificent Seven with a big tech requirements. three biotech stocks that have growth potential and pay dividends.
Much of the momentum that big tech created in 2024 was Related to artificial intelligence. Almost all Magnificent Seven companies are investing heavily in their own AI projects and further developing AI capabilities. The drive to create the best artificial intelligence NvidiaThe shares and market capitalization are so high that it will become a member of the Magnificent Seven in 2024. However, the continued growth of Big Tech depends heavily on continued access to chips and other components made in China.
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The new Trump administration has made no secret of its plans to impose high tariffs on Chinese-made chips and technology products. That means costs are likely to skyrocket for any Magnificent Seven company that has invested in AI development, which is all of them. Those higher costs will likely mean higher consumer prices and lower profits for the Magnificent Seven, which explains why analysts see a potential slowdown on the horizon.
Biotech stocks, in contrast, had a more challenging 2024, but could rebound and win over investors this year. Here are Miramar Capital’s favorites:
Merck is one of the world’s most famous suppliers of vaccines, medical treatments and veterinary products. The company’s shares have wobbled for much of the past year, hitting a high of $134.64 in June before falling to $94.48 in November. Analysts attributed the drop to the company cutting its annual earnings per share estimate by $0.24 to pay for partnerships with Curon Biopharmaceutical and Daiichi Sankyo.
They also noted that sales of one of Merck’s top products, Gardasil, had declined in the lucrative Chinese market. However, the $0.24 write-down was a one-time expense, and sales of other Merck products such as Keytruda, Winrevair and Capvaxie remain brisk. Because of this, analysts believe Merck has real growth in 2025 and could be value at the current share price of $99.85.
A Benzinga poll of 27 analysts has a consensus price target of $124.58 for Merckwith high and low estimates at $155 and $104, respectively. Merck trades at $100.09 and pays a dividend of 3.25%. Public filings show it’s on a 14-year streak of increasing dividends. So about 25% of the value in growth potential and roughly $3.25 per share in passive income awaits investors here. It’s worth a look.
Bristol Myers Squibb is another reputable biotech company specializing in drugs against serious diseases. This gives Bristol’s products a strong global appeal, and the company has a very active research and development wing. This advantage in new drug development means that many Bristol products have long lives as profit generators thanks to the company’s patent rights.
Bristol’s share price fell in early 2024 until hitting a yearly low of $39.35 in July before returning to the $61 range in November. The share price has since fallen to $56, but analysts believe it will continue to move in the right direction. Bristol had a strong third quarter of 2024, recording revenue of nearly $12 billion, up 8% from the prior year.
The company also had another cancer drug, Opdivo Quanting, approved by the FDA. That could explain why Bristol raised its annual revenue expectations to $47 billion. Analysts do not see excessive growth in Bristol shares, but this stock is attractive to passive income investors. Bristol has increased its dividend for 17 consecutive years, according to public records. It currently pays 4.45% on its $56 share price, which is about $2.50 per share.
AbbVie has a long-standing reputation as a solid biopharmaceutical stock. It produces some of the world’s most recognizable drugs for autoimmune disorders in Skyriza and Rinvoq. Many of AbbVie’s drugs are designed to treat chronic diseases, creating a solid revenue base that should continue well into the future. Like many of its contemporaries in the biotech sector, AbbVie shares have seen their ups and downs in 2024.
The lowest point came in May, when it fell to $153, but rebounded strongly due to a very positive Q3 2024 earnings report and reached a peak price of $207 in October. That report for the third quarter of 2024 showed a 3.6% year-over-year increase in revenue, which meant $14.46 billion went into AbbVie’s coffers. AbbVie shares have pulled back somewhat from their October highs and are currently trading at $171.45.
Benzinga research of 36 analysts it shows a consensus price target of $192.13. That represents a potential upside of roughly 20% to AbbVie’s current share price, but that’s not the only reason you should consider buying. This stock is also the dividend king, paying a respectable 3.74%, which translates to $6.41 per share in passive income.
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