Top Wall Street Analyst Says Dump The Magnificent 7 And Go All In On These Three Big Pharma Dividend Stocks
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2024 was a great year for investors whose portfolios included Magnificent Seven stocks. Big Tech’s runaway growth created gains, but headwinds are forming and some observers doubt the Mag Seven can sustain its momentum in 2025. With that in mind, Miramar Capital analysts believe it might be time to replace the big-tech-heavy Magnificent Seven with these three biotech shares that have growth potential and pay dividends.
Much of the momentum Big Tech generated in 2024 was AI-related. Almost all the Magnificent Seven companies are heavily invested in their own AI projects and developing AI’s capabilities even further. The drive to create the best AI pushed Nvidia‘s shares and market cap so high that it became a Magnificent Seven member in 2024. However, Big Tech’s continued growth depends heavily on continued access to chips and other components made in China.
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The incoming Trump Administration has made no secret of its plans to levy a heavy tariff on Chinese-made chips and tech products. That means expenses will likely rise sharply for any Magnificent Seven company that’s invested in developing AI, which is all of them. Those higher expenses 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, by contrast, had a more challenging 2024, but they may be set to bounce back and win for investors this year. Here are Miramar Capital’s favorites:
Merck is one of the world’s best-known suppliers of vaccines, medical treatments and veterinary products. The company’s stock seesawed for much of last year and hit a high of $134.64 in June before tumbling to $94.48 in November. Analysts attributed the drop to the company lowering its full-year earnings per share estimates 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, declined in the lucrative Chinese market. However, the $0.24 write-down was a one-time charge and sales of other Merck products like Keytruda, Winrevair and Capvaxie remain brisk. This is why analysts believe Merck has a real upside in 2025 and it could be a value at the current $99.85 share price.
Benzinga’s survey of 27 analysts has a consensus price target of $124.58 for Merck, with the highest and lowest estimates at $155 and $104, respectively. Merck trades at $100.09 and pays a dividend of 3.25%. Public filings show it on a 14-year streak of increasing dividends. So, about 25% worth of upside potential and roughly $3.25 per share in passive income waiting for investors here. It’s worth a look.
Bristol Myers Squibb is another well-respected biotech company specializing in medicines fighting serious diseases. This gives Bristol products a strong global appeal and the company has a very active research and development wing. That edge in developing new medicines means many Bristol products have long lives as profit generators due to the company’s patent rights.
Bristol’s share price declined early in 2024 until it hit a year-low of $39.35 in July before storming back to the $61 range in November. The share price has since slipped to $56, but analysts believe it will continue trending in the right direction. Bristol had a strong Q3 2024, reporting nearly $12 billion in revenue, which bested the previous year’s revenue by 8%.
The company also had another cancer drug, Opdivo Quanting, approved by the FDA. That may explain why Bristol raised its annual revenue expectations to $47 billion. Analysts do not see excessive upside in Bristol stock, but this stock appeals to passive income investors. According to public filings, Bristol has raised its dividend for 17 consecutive years. It’s currently paying 4.45% on its $56 share price, which is about $2.50 per share.
AbbVie has a long-standing reputation as a solid biopharma stock. It produces some of the world’s most recognizable autoimmune disorder medications in Skyrizi and Rinvoq. Many of AbbVie’s medications are designed to treat chronic ailments, which creates a solid revenue base that should continue well into the future. Like many of its contemporaries in the biotech sector, AbbVie stock had an up-and-down 2024.
The low point came in May, when it slumped to $153, but it rebounded strongly due to a very positive Q3 2024 earnings report and hit a peak price of $207 in October. That Q3 2024 report showed a 3.6% increase in year-on-year revenue, which meant $14.46 billion went into AbbVie’s coffers. AbbVie’s stock has retreated somewhat from its October high and it’s currently trading at $171.45.
Benzinga’s survey of 36 analysts shows a consensus price target of $192.13. That represents a potential upside of roughly 20% from AbbVie’s current share price, but that’s not the only reason you may want to consider buying in. This stock is also a Dividend King and pays a respectable 3.74%, which translates to $6.41 per share in passive income.
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