Pfizer (PFE) stock plunged about 18% from its August 2021 peak, giving up a considerable chunk of the gains enjoyed during the early summer.
With booster-shot season quickly approaching, the $239-billion biopharmaceutical company behind the COVID-19 vaccine Comirnaty may be in for a bounce-back as prudent investors rotate back into value names with underestimated growth profiles.
With an attractive growth profile and a depressed valuation, I remain bullish on shares of Pfizer. (See today’s best-performing stocks on TipRanks)
Pfizer Looks More Exciting Than Moderna
With a mere 18x trailing earnings multiple, you wouldn’t view Pfizer, a more than century-old company, as on the cutting edge of innovation.
The incredible mRNA vaccine that helped the world curb COVID-19 is an astonishing innovation for a company that still doesn’t seem to get the hype it deserves.
While Moderna (MRNA) and its more potent Spikevax coronavirus vaccine may be a pure-play on mRNA vaccines that aim to inoculate against more than just COVID-19, its stock is wildly expensive, with way too much optimism baked in.
Indeed, if a clinical trial doesn’t go well, Moderna stock likely has more room to the downside. Although Pfizer’s COVID-19 vaccine and boosters will not move the needle as high as it would for Moderna, one must not discount Pfizer’s innovations, or assume the firm is no longer capable of reinventing itself into a higher-growth company.
On the other hand, Pfizer already has the bar set low, with similar innovations behind the scenes.
Like Moderna, Pfizer is leveraging mRNA technology to create new vaccines to treat ailments beyond COVID-19. Most notably, Pfizer recently launched an influenza mRNA vaccine that’s currently in Phase 1 of clinical trials.
With so much potential behind the mRNA technology, Pfizer may look to develop mRNA vaccines to treat rare genetic diseases, or even cancer.
Moderna may be a more exciting stock, given its momentum. However, Pfizer has many similar mRNA innovations that likely warrant a much higher multiple than the one PFE currently commands.
Growth Beyond COVID-19 Vaccine
After ridding itself of its off-patent business Upjohn, Pfizer is poised to enjoy greater growth as it looks to take advantage of meaningful opportunities within the space. Generics can be a cash cow, but they can be a burden on growth.
With several potential blockbuster drugs in the pipeline that aim to treat a wide range of disease, ranging from cancer to heart disease, Pfizer is becoming more of a biotechnology company and less of a pharmaceutical company. Indeed, Pfizer has deep pockets and more than enough talent to become a very successful player in the mega-cap biotechnology space.
Furthermore, top-selling pneumococcal vaccine Prevnar 13, and a wide range of other products beyond COVID-19 vaccines, could add to the firm’s sales growth, as the stock looks to sustain a rally above and beyond its peak just shy of the $50 mark.
Wall Street’s Take
According to TipRanks’ consensus rating, PFE stock comes in as a Hold. Out of 12 analyst ratings, there are two Buy recommendations and 10 Hold recommendations.
The average Pfizer price target of $45.38 implies 6.3% upside. Analyst price targets range from a low of $40.50 per share, to a high of $61 per share.
Bottom Line on Pfizer Stock
Prior to its COVID-19 vaccine breakthrough, Pfizer hadn’t exactly been hogging the headlines for new breakthrough drugs or treatments.
This should change, though, as a greater frequency of launches is to be expected, with some drugs showing blockbuster potential. Could the COVID-19 vaccine be the first of many profoundly successful products to come out of Pfizer’s new pipeline?
It seems likely. Regardless, Pfizer stock’s modest multiple may be discounting the company’s incredibly robust product candidates, and its talented R&D team. For now, expect Pfizer’s COVID-19 vaccine to continue generating considerable cash flows.
In short, there’s a lot to love about Pfizer. The COVID-19 vaccine, other mRNA-based trials, a potential oral treatment for COVID-19, its current slate of non-COVID products, and a pipeline full of promise.
Add the 3.8% dividend yield into the equation, and the value proposition offered by Pfizer stock may be too good to ignore after the latest pullback.
Disclosure: Joey Frenette owned shares of Pfizer at the time of publication.
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