Buy the Dip in Pfizer, Here's Why
The world’s premier biopharmaceutical company Pfizer’s (PFE) COVID-19 vaccine approval by the FDA marked a breakthrough achievement in the world’s bat...
The world’s premier biopharmaceutical company Pfizer’s (PFE) COVID-19 vaccine approval by the FDA marked a breakthrough achievement in the world’s battle with the COVID-19 pandemic. As the company prepares to roll out booster doses, it is well-positioned to see strong sales growth in the near term. And now that the stock is trading below its 52-week price high, we believe it’s the perfect time to scoop up its shares. So, let’s discuss.
Global biopharmaceutical company Pfizer Inc. (PFE), which is based in New York City, manufactures, markets, and sells medicines and vaccines worldwide. The New York-based vaccine maker catapulted into the limelight after producing the Pfizer-BioNTech COVID-19 vaccine last year. It is now marketed as Comirnaty, for preventing COVID-19 disease in individuals 16 years of age and older. PFE’s shares have rallied 20.2% in price over the past three months, driven by news of its COVID-19 vaccine becoming the first of its kind to be fully approved by the U.S. Food and Drug Administration.
Closing yesterday’s session at $46.75, PFE is trading just 9.9% below its 52-week price high of $51.86. As COVID-19 cases in the United States hit 40 million, more unvaccinated individuals are likely to go for the FDA-approved vaccine amid the rapid spread of the virus’ Delta variant. Furthermore, as the company prepares to roll out its booster shots, the drugmaker should witness a strong surge in sales in the coming months.
In addition, PFE raised its 2021 financial guidance for the second consecutive quarter due to increased expected contributions from its COVID-19-related and mRNA-based programs, as well as other business segments.
Here’s what could shape PFE’s performance in the coming months:
Favorable Analyst Estimates
Analysts expect PFE’s EPS to increase 152.4% year-over-year to $1.06 in the next quarter. ending December 2021. Its consensus EPS estimates indicate a 51.4% increase in the current quarter, ending September 2021, and an 85.1% increase in its fiscal year 2021. PFE has an impressive earnings surprise history; it surpassed the Street’s EPS estimates in three of the trailing four quarters.
A $22.79 billion consensus revenue estimate for the current quarter indicates an 87.9% improvement year-over-year. Also, its revenue is estimated to increase 93.3% year-over-year to $81 billion in 2021.
Note that PFE is one of the few stocks handpicked by our Chief Growth Strategist, Jaimini Desai, currently in the POWR Growth portfolio. Learn more here.
Full FDA Approval of COVID-19 Vaccine
Last month, PFE and BioNTech SE’s (BNTX) Biologics License Application for COVID-19 Vaccine, mRNA--COMIRNATY--was approved by the U.S. Food and Drug Administration (FDA) for individuals 16 years and older. This marks the first COVID-19 vaccine to be granted full FDA approval. While the vaccine has been available since December 2020 under the FDA’s Emergency Use Authorization, its high efficacy and favorable safety profile after a second dose pushed the FDA to fully approve the vaccine, amid urgent appeals for it to do so.
Albert Bourla, Pfizer’s Chairman and Chief Executive Officer, said, "I am hopeful this approval will help increase confidence in our vaccine, as vaccination remains the best tool we have to help protect lives and achieve herd immunity.” In addition, with more than 1.2 billion doses shipped worldwide, this approval should help the company maintain its solid growth.
Last month, PFE and BNTX forged a deal with Brazilian biopharmaceutical company Eurofarma Laboratórios SA to manufacture COMIRNATY--COVID-19 vaccine--for Latin America. The arrangement should expand the company’s global supply chain network as it continues to increase its manufacturing capacity and ensure equitable and affordable access to COVID-19 vaccines worldwide.
Also, last month, PFE’s XELJANZ (tofacitinib) drug, for treating active polyarticular juvenile idiopathic arthritis and juvenile psoriatic arthritis, received approval from the European Commission. In addition, the EC approved the company’s XELJANZ prolonged-release 11 mg once-daily tablets. This authorization marks PFE’s continued advancement in science and understanding of medicines for treating various diseases.
Solid Financial Performance
PFE’s total revenue grew 92% year-over-year to $18.98 billion in the second quarter, ended June 30, 2021. This was driven primarily by BNT162b2’s $7.8 billion contributions in direct sales and alliance revenues. Its biosimilars revenue grew 88% operationally to $559 million, while hospital products globally rose 17% operationally to $2.3 billion. The company’s adjusted net income was $6.08 billion, representing a 75% increase year-over-year. Also, its EPS amounted to $1.07, up 73% from the same period last year. And its income from continuing operations rose 113.7% year-over-year to $5.57 billion over this period.
PFE’s 36.3% trailing-12-month EBITDA margin is 505.6% higher than the 6% industry average. Furthermore, the company’s trailing-12-month net income margin and ROE of 23.8% and 18.3%, respectively, compare favorably with industry averages. Also, its 56.9% trailing-12-month levered free cash flow is significantly higher than the 0.3% industry average.
POWR Ratings Reflect Promising Outlook
PFE has an overall A rating, which translates to Strong Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight different categories. PFE has a Growth grade of B, which is consistent with analysts’ expectation that its revenue and earnings will grow.
Also, in terms of Value grade, PFE has a B. The stock’s 11.39x non-GAAP P/E, which is 51.5% lower than the 23.49x industry average, is in sync with this grade.
In addition, it has a B grade for Quality. This justifies the company’s higher-than-industry EBITDA margin.
Click here to see the additional POWR Ratings for PFE (Stability, Sentiment, and Momentum).
The stock is ranked #8 of 217 stocks in the Medical – Pharmaceuticals industry.
PFE’s continued revenue growth from COVID-19 vaccine BNT162b2, as well as other products and categories, should help the company maintain its dominant position in the biopharmaceutical market. In addition, investor optimism surrounding the full FDA approval of its vaccine and its plans to roll out booster doses should help the stock price advance in the coming months. So, we think it could be wise to bet on the stock now.
How Does Pfizer Stack Up Against its Peers?
PFE has an overall A rating in our proprietary rating system. Check out these other stocks within the Medical – Pharmaceuticals industry with an A (Strong Buy) rating: Novartis AG (NVS), Johnson & Johnson (JNJ), and Ipsen S.A. (IPSEY).
PFE shares were trading at $46.32 per share on Wednesday morning, down $0.43 (-0.92%). Year-to-date, PFE has gained 29.62%, versus a 21.54% rise in the benchmark S&P 500 index during the same period.
About the Author: Imon Ghosh
Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization.