Pfizer, Inc. (PFE) is a U.S. biopharmaceutical company that develops, manufactures, and sells healthcare products worldwide. It offers medicines and vaccines in various therapeutic areas, and operates through the Biopharma, Upjohn, and Consumer Healthcare segments.
In April, PFE teamed with the German biopharma company, BioNTech S.E. (BNTX), to jointly develop a COVID-19 vaccine, using a technology called synthetic messenger RNA (mRNA) — a genetic-material approach designed to provoke an immune response.
With a 95% efficacy, PFE and BNTX’s jointly developed BNT162b2 vaccine received emergency use authorization from the United States Food and Drug Administration (FDA) agency on December 11.
PFE is one of the most discussed pharmaceutical stocks so far this year, dominating headlines because of its vaccine candidate and record revenue growth. In the third quarter, PFE delivered a top-line of $12.1 billion, driven primarily by 4% year-over-year operational growth from the Biopharma segment. This reflected its impressive portfolio of biosimilars as well as continued strength from key brands. However, EPS for the quarter came in $0.72, declining 3% year-over-year because most of the company’s resources were redirected to the vaccine’s development. Despite securing FDA emergency authorization and beginning vaccine deployment, the company’s stock has gained merely 0.6% year-to-date.
With the vaccine representing the company’s most significant near-term growth catalyst, and with the potential upside based on other factors, PFE has earned a “Buy” rating in our proprietary rating system.
Here is how our proprietary POWR Ratings system evaluates PFE:
Trade Grade: A
PFE is currently trading near its 50-day moving average of $37.91 but is above its 200-day moving average of $36.36. This indicates that the stock is in an uptrend. In fact, the stock’s 9.4% gain over the past three months reflects short-term bullishness.
The FDA authorization followed a vote by the U.S. Centers for Disease Control and Prevention’s (CDC) Advisory Committee on Immunization Practices (ACIP) to recommend the vaccine for people ages 16 and older.
PFE is the first company to commercially roll out a COVID-19 vaccine after receiving approval from multiple regulatory approval bodies, including the European Union, United Kingdom, Canada, Mexico, Saudi Arabia, and Bahrain. Though initial doses of the vaccine will be limited as manufacturing ramps up, it is expected to be distributed in four phases, with the most critical nursing staff and at-risk people getting it first.
Buy & Hold Grade: B
In terms of proximity to its 52-week high, which is a key factor that our Buy & Hold Grade considers, PFE is fairly positioned. The stock is currently trading 13.2% below its 52-week high of $43.08.
Looking at the past three years, the stock has returned 21.7% due to its aggressive R&D expenditure to develop its hefty product line, and exceptional dividend payouts. Though PFE’s top-line has declined at a CAGR of 2.5% in the same period, its four-year average dividend yield is 3.79%.
The company has received pre-orders for 600 million doses of COVID vaccines globally, including 300 million from the EU and 120 million from Japan, which it aims to deliver by the middle of next year.
Along with the COVID-19 vaccine, PFE has been developing multiple other drugs and vaccines catering to various ailments, particularly for cancer treatment. PFE currently has a total of 92 projects in its pipeline, of which 57 are in Phase 2 or 3 trails. By 2025, PFE is expected to secure approval for six diabetic medicines, six vaccines, 12 autoimmune drugs, three gene therapies and 14 cancer treatments, which would contribute more than $15 billion to its annual revenue.
Peer Grade: B
PFE is currently rated #25 of 240 stocks in the Medical – Pharmaceuticals industry. Other popular stocks in the group are Johnson & Johnson (JNJ), Teva Pharmaceutical Industries (TEVA) and BeiGene, Ltd. (BGNE). While TEVA has lost 0.1% so far this year, JNJ and BGNE have gained 7.8% and 57.7%, respectively, over this period.
Industry Rank: A
PFE is part of the StockNews.com Medical – Pharmaceuticals industry, which is ranked #15 of the 123 industries. The companies in this industry manufacture and process pharmaceutical products in the treatment of health disorders and illnesses. The profitability of individual companies depends on their ability to discover and market new drugs. The COVID-19 outbreak has highlighted the importance of science in advancing the treatment of all ailments.
The race for a coronavirus vaccine has made the industry one to watch. It is expected to perform well in the upcoming months thanks to the increasing demand for pharma products.
Overall POWR Rating: B (Buy)
Overall, PFE is rated a “Buy” due to its extensive product-line, robust demand for its vaccine from both developed and emerging economies, and solid industry strength, as determined by the four components of our overall POWR Rating.
PFE has received the first authorization in the world for an effective coronavirus vaccine. Americans started receiving the first shots of PFE’s vaccine last week and at least 556,208 shots have already been administered from 2.84 million doses distributed so far. PFE has agreed to provide the U.S. with 100 million doses by the end of March.
However, the stock recently witnessed a decline because of the complex distribution challenges the vaccine faces (it has rigid storage and temperature requirements, for example) with officials predicting it will take months to immunize everyone in the U.S. who wants to be vaccinated.
However, PFE is not having any production issues with its vaccine, and no shipments containing the vaccine are on hold or delayed. Moreover, it has millions more doses sitting in warehouses awaiting shipment instructions.
Analyst sentiment, which gives a good sense of a stock’s future price movement, is impressive for PFE. Analysts expect the company’s revenues and EPS to grow 7.2% and 5.6%, respectively, next year. With that, we believe PFE offers the best investment opportunity right now.
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PFE shares were trading at $36.87 per share on Tuesday morning, down $0.51 (-1.36%). Year-to-date, PFE has gained 3.40%, versus a 15.86% rise in the benchmark S&P 500 index during the same period.
About the Author: Sidharath Gupta
Sidharath’s passion for the markets and his love of words guided him to becoming a financial journalist. He began his career as an Equity Analyst, researching stocks and preparing in-depth research reports. Sidharath is currently pursuing the CFA program to deepen his knowledge of financial anlaysis and investment strategies. More...
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