To say the Covid-19 vaccination wave in 2021 moved the needle for Pfizer (NYSE:PFE) stock is an understatement.
Revenue nearly doubled thanks to its vaccine candidate (Comirnaty), which the pharma firm co-developed with BioNTech (NASDAQ:BNTX). PFE stock performed strongly as well during this timeframe.
So far in 2022, however, Pfizer’s performance has been far less stellar. The vaccination wave peaked earlier this year, and revenue/earnings are expected to drop in 2023.
In anticipation of this, investors have bid down shares, resulting in PFE now sporting an extremely low valuation. Yet as seen in the company’s latest earnings report, long-term prospects are far brighter than current sentiment suggests.
Namely, because of Pfizer’s promising pipeline of drug/vaccine candidates. Add in the steady returns offered by its dividend, and there’s a lot pointing to buying this stock now before the market catches on to its true potential.
| PFE | Pfizer | $47.38 |
PFE Stock: What’s Making Investors Hesitant?
On Nov. 1, Pfizer reported fiscal results for the third quarter 2022 (ending Sept. 30). Reporting $22.6 billion in revenue, and earnings of $1.51 per share, results came in ahead of Wall Street expectations.
Not only that, but the company also raised its full-year 2022 guidance and provided the latest on its various drug candidates currently in the clinical trial stage. Yet while this overall-positive earnings report/guidance update may seem like something to fuel a rally for PFE stock, unfortunately, that has failed to occur.
Shares popped right after the announcement, but have since given back these post-earnings gains. Put simply, the market remains hesitant about entering a position in PFE right now.
The current perception is that there is high uncertainty over results in the coming quarters, as demand for Covid-19 vaccine boosters, even among seniors, wanes.
But the specter of declining Covid-19 vaccine revenue/earnings is already accounted for in Pfizer’s valuation and then some. Beyond just the potential for future results to be “less bad” than currently expected, there’s also the possibility of the pharma giant’s earnings stabilizing and beginning to pick back up.
Potential for Strong Returns, Thanks to 3 Factors
Three factors could push PFE stock higher from here. First, a possible re-rating of shares. As mentioned, investors have overreacted to changing vaccine trends, pushing the stock to too low of a valuation.
Sell-side forecasts call for Pfizer’s earnings per share to drop from $6.46 to $4.91 next year.
In other words, PFE trades at a forward price-to-earnings ratio of only 9.5. Comparable big pharma stocks trade at forward multiples in the 10-15 range. In time, shares could close this valuation gap.
Second, Pfizer’s quarterly dividend (giving it a yield of 3.42% annually) is also likely to boost total returns. The company also has a decent track record of dividend growth, raising payouts twelve years in a row.
Third, the potential for much stronger earnings in the years ahead, which would also likely push PFE higher.
Declines in Comirnaty sales, as well as sales of Covid treatment Paxlovid could be more gradual than expected. Furthermore, new treatments/vaccines could help make up the difference. These could also help offset, or perhaps outweigh, patent expirations set to happen later this decade.
Bottom Line on PFE Stock
Pipeline’s current pipeline may not include another Comirnaty or Paxlovid in the making, but some of its candidates have particularly strong chances of becoming blockbusters, generating billions in annual sales.
For instance, Pfizer’s RSV vaccine candidate, which as Phase 3 trial results recently revealed, demonstrates a high level of efficacy. Cases of RSV, which can be severe and possibly life-threatening for infants, have surged lately.
If this candidate obtains regulatory approval, it would be the first maternal vaccine on the market for this virus. Other candidates, targeting the treatment of conditions such as prostate cancer, sickle cell disease, and ulcerative colitis, could become big hits as well.
With a low valuation and dividend/earnings growth potential, you may want to consider PFE stock now, before the market starts to catch onto its long-term potential.
PFE stock earns a B rating in Portfolio Grader.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
