Pfizer, Inc.’s (PFE) stock has lost 9% so far this year because investors expected better financial results from this established biopharmaceutical company for its last-reported quarter (ended December 31, 2020). Also, competition is increasing on the coronavirus vaccine front; Johnson & Johnson’s (JNJ) single-dose vaccine recently became the third COVID-19 vaccine to receive FDA emergency use authorization (EUA).
However, we believe the price decline offers a good entry point to PFE because it is a strong player based on its broad portfolio of COVID and non-COVID products, and its numerous strategic acquisitions over the years. In fact, the stock has gained 11.8% over the past three years.
Moreover, PFE is expected to generate huge revenues from its COVID-19 vaccine because it may be necessary for people to have regular booster shots to maintain their immunity to the virus.
Here are the factors that we think could shape PFE’s performance in the near term:
Increasing Demand for COVID-19 Vaccine
Since it was announced last November 2020 that PFE and BIONTECH SE’s (BNTX) mRNA-based COVID-19 vaccine candidate, COMIRNATY (also named BNT162b2), was more than 95% effective against COVID-19, the companies have been ramping up their production of vaccines to meet the demand for it more quickly.
After receiving EUA from the FDA, the companies announced that they have signed a second agreement with the U.S. government to supply an additional 100 million doses. The companies also announced an agreement with the European Commission (EC) on February 17, 2021 to supply an additional 200 million doses of COMIRNATY.
Broad Portfolio of Non-COVID 19 Products
PFE and EMD Serono, the biopharmaceutical business of Merck KGaA (MKKGY), announced in January 2021 that the European Commission (EC) had approved Bavencio as monotherapy for the first line maintenance treatment of adult patients with locally advanced or metastatic urothelial carcinoma who are progression-free following platinum-based chemotherapy.
Also, last month the FDA approved the supplemental Biologics License application for PFE’s PANZYGA, which is used to treat adult patients with a rare neurological disease of the peripheral nerves called chronic inflammatory demyelinating polyneuropathy (CIDP). The FDA also approved the company’s XALKORI, which is the first biomarker-driven therapy for relapsed or refractory ALCL in young people.
In terms of its non-GAAP forward price/earnings, PFE is currently trading at 10.05x, 58.5% lower than the industry average 24.23x. In terms of forward enterprise value/sales, the stock’s 3.90x is 50.1% lower than the industry average 7.81x. The stock’s forward price/sales of 3.03x is also lower than the industry average 8.48x.
Favorable Analyst Estimates
Analysts expect the company’s revenue to increase 12.7% for the current quarter, ending March 31, 2021 and 31.2% for the quarter ending June 30, 2021. Its EPS is expected to grow 11.5% for the quarter ending June 30, 2021, 48.6% in fiscal 2021 and at a rate of 10.6% per annum over the next five years.
Wall Street analysts expect the stock to hit $41.09 in the near term, which indicates a potential upside of nearly 22%.
POWR Ratings Show Promise
PFE has an overall rating of B, which equates to Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight different categories. Among these categories, PFE has a grade of B for Value in sync with the stock’s lower-than-industry valuation ratios.
The stock has a B grade for Quality also. This is consistent with the stock’s trailing-12-month gross profit margin of 79.5% versus the industry average 56.9%.
Click here to access PFE’s ratings for Growth, Momentum, Stability and Sentiment as well.
PFE is ranked #27 of 240 stocks in the Medical – Pharmaceuticals industry.
There are several other top-rated stocks in the same industry. Click here to access them.
PFE’s stock declined 9% year-to-date and 4.2% over the past year because competition is increasing on the coronavirus vaccine front. But in no way is PFE a stock to ignore. In fact, we think the stock’s discounted valuation offers a good entry point for investors looking to benefit from the company’s long-term growth.
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PFE shares were trading at $34.21 per share on Wednesday afternoon, up $0.70 (+2.09%). Year-to-date, PFE has declined -6.05%, versus a 2.60% rise in the benchmark S&P 500 index during the same period.
About the Author: Manisha Chatterjee
Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst. More...
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