Pfizer (PFE) has been one of the earliest biotech firms to launch a COVID-19 vaccine successfully. However, this pharmaceutical company has not seen its stock price perform as well as some of its peers. Looking at Moderna (MRNA), for example, there’s quite a large variance between the two drug makers.
Granted, both companies have very different business models. However, Pfizer’s relative underperformance to the sector invites fundamentally-conscious investors to consider whether there’s some real value with this mega-cap pharma play. (See Pfizer stock charts on TipRanks)
Indeed, Pfizer’s COVID-19 vaccine is simply one (relatively small) part of the company’s overall drug portfolio. From Viagra to other drugs many Americans take on a daily basis, Pfizer is well-known as a leading innovator in the pharma space. Despite this, the company’s valuation multiple still remains around 20, with a dividend yield of 3.3%. In the view of many value investors, that’s dirt-cheap for a company with this kind of growth potential.
Pfizer’s recent earnings have highlighted the growth potential Pfizer’s core portfolio of drugs brings to the table. Indeed, unlike some of Pfizer’s peers, should the COVID-19 vaccine be taken completely off the table, this is still a stock many would argue is cheap.
That said, let’s dive into some of the details around Pfizer’s earnings and its valuation to get a better grasp of why this is a great stock to consider right now. I am bullish on this stock.
Robust Earnings and Fundamentals
Pfizer remains an absolute machine in terms of top- and bottom-line performance. This past quarter, the company brought in a total of $7.8 billion in sales from its COVID-19 vaccine. These sales helped drive adjusted earnings per share of $1.07 this past quarter alone. On an annualized basis, that puts Pfizer’s forward valuation multiple at less than 11-times adjusted earnings. That’s pretty hard for any value investor to ignore.
For growth investors, there’s also a lot to like about Pfizer stock. The company reported growth of 73% year-over-year on its bottom line. Those sorts of growth numbers on a company’s bottom line are certainly hard to come by.
These results were driven not only by the company’s COVID-19 vaccine, but also by surging sales in other key drugs. For example, sales from the company’s blood thinner Eliquis, its pneumonia vaccine, and breast cancer drug Ibrance, have comfortably surpassed analysts’ predictions. Notably, revenue from Vyndaqel jumped 81% in Q2 to reach $501 million.
Thus, it’s important to point out that Pfizer isn’t a one-trick pony. Rather, this is a pharmaceutical giant with some excellent growth prospects. To boot, the company has raised its forecasts for the coming quarters, and boosted its guidance. Investors bullish on growth in the pharma space certainly have a steady Eddie to choose from in Pfizer.
Astronomical Growth Potential
Pfizer is a company that has proven it can grow much more rapidly than many investors expected. This is a stock that could potentially post double-digit earnings per share growth for the next few years. Experts believe that surging COVID-19 vaccinations (including boosters) and a continuation of approvals along the company’s drug pipeline could drive said outperformance.
Indeed, the fact that Pfizer is so diversified across various lines of business in the pharmaceutical space ought to be bullish for long-term investors. This is a company that has built an R&D-heavy business model that’s starting to reap the benefits. Should additional approvals come over the medium-term, it’s possible investors will start to view Pfizer as a top-notch growth play.
What Analysts are Saying about PFE Stock
As per TipRanks analyst rating consensus, Pfizer stock is a Hold. Out of 10 analyst ratings, there are 2 Buy recommendations and 8 Hold recommendations.
The average Pfizer price target is $45.44. The analyst price target ranges from a high of $61 for each share to a low of $41 per share.
The risk associated with Pfizer is quite negligible. It might not deliver an unbelievably high return, but at the same time, investors will not have to take on excess risk. Accordingly, even if one pipeline drug fails to get a positive market response, it might not have any significant impact on the share price.
This is an undervalued long-term buy-and-hold opportunity unlike any other stock in the pharmaceutical space today.
Disclosure: At the time of publication, Chris MacDonald did not have a position in any of the securities mentioned in this article.
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