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Pfizer: A Growth Stock with a Value Multiple

Pfizer (PFE) may be an old, behemoth-sized blue-chip, but its incredible management team has really shuffled the cards in a way to reinvigorate growth. It gets harder to grow as a company gets older and larger, but it is possible. Just look to Microsoft (MSFT), which continues to defy the laws of corporate aging.

Pfizer is a biopharmaceutical company that we all know and love. It’s a stalwart, with a large dividend and not much to offer on the growth front. The new Pfizer, though, is an entirely different beast. It has a new logo and a very ambitious growth profile, including a full pipeline and an exceptional management team.

The Pfizer of today is incredibly innovative, even though its valuations suggest otherwise. The company did pull the curtain on the Comirnaty COVID-19 vaccine, after all.

More such innovations in Pfizer’s promising pipeline of products could pave the way for continued appreciation, even after the pandemic goes endemic and seasonal booster shots no longer become a thing.

Pfizer seems too cheap to ignore at just 15.3 times trailing earnings and 4.2 times sales, especially going into a year that could see investors rotate away from high-multiple growth stocks to more traditional value stocks capable of delivering growth surprises.

Despite the recent run past $50, I remain incredibly bullish on PFE stock. (See Analysts’ Top Stocks on TipRanks)

More Innovations Could Give Lift to Pfizer Stock

COVID-19 vaccines were a major needle-mover in past quarters. It’s also expected to lift Pfizer stock, with the vaccine being approved for children between 5 and 11 in select localities. Moving ahead, the company’s safe and effective treatment pill is an excellent complement to the vaccine and could help PFE stock support a continued rally to higher highs.

Such an oral treatment could cannibalize vaccine revenues. However, both COVID-fighting products will give Pfizer the edge over other firms in the ongoing pandemic, which is showing no signs of going away, with cases surging across Europe.

Add the recent WHO special meeting over an extremely mutated COVID-19 variant discovered in South Africa into the equation, and it becomes more apparent that vaccines and treatment demand are not going to wane anytime soon.

In a way, Pfizer’s treatment, named Paxlovid, and preventative vaccine, Comirnaty, is the ultimate one-two punch in the fight against COVID-19. Indeed, the mRNA technology behind Pfizer’s vaccine is also remarkable and could lead to future treatments that could become profoundly profitable for Pfizer.

Recently, Pfizer agreed to supply 10 million Paxlovid courses to the government in a deal worth $5.3 billion. It’s still hard to gauge just how long demand for the treatment will last, but given that COVID-19 is unlikely to go endemic next year, or even in 2023, investors should not discount the potential cash flows from the innovative product.

If anything, the advent of such a drug improves the chances of positive surprises. For now, analysts are likely to remain conservative with their estimates for the drug, given profound uncertainties as to what the pandemic’s next course will be.

Wall Street’s Take

Turning to Wall Street, Pfizer has a Moderate Buy consensus rating, based on four Buys and nine Holds assigned in the past three months. The average Pfizer price target of $49.92 implies 7.3% downside potential.

Analyst price targets range from a low of $41 per share to a high of $61 per share.

The Bottom Line on Pfizer Stock

Analysts remain quite mixed on Pfizer stock, with mostly Hold recommendations and a consensus price target that implies a negative return.

Undoubtedly, Paxlovid is a product whose multi-year demand may be tough to project. With many other innovations behind the scenes, analysts may be playing it too conservatively with their estimates. With a bountiful 3% dividend yield, Pfizer is a magnificent way to get income, growth, and value, all in one package.

Disclosure: Joey Frenette owned shares of Pfizer at the time of publication.

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