Hold Pfizer Today With Catalysts for Further Growth Tomorrow
Pfizer stock is down 12% in 2022. However, there is one short-term and one long-term catalyst that should inform your decision on whether PFE stock is right for your investment...
There are short-term and long-term opportunities for PFE stock
Pfizer (NYSE: PFE) stock is down 12% in 2022. Even though that's better than the broader market, there are some concerns that Pfizer's Covid-19 vaccine rally is winding down. But a recent announcement by the United States Food & Drug Administration (FDA) indicates that Pfizer may still have room to expand its lead in the Covid-19 vaccine race.
However, the Covid-19 vaccine development is creating a longer-term catalyst for PFE stock. And the company has the balance sheet and scientific expertise to capitalize on this emerging growth opportunity.
In this article, we'll give you a brief outline of both catalysts so you can decide if an investment in PFE stock is right for your investment objectives.
Pfizer May Surprise This Earnings Season
Market watchers are advising investors to expect many analysts to revise their price targets lower during this earnings season. So it's important to note that Pfizer recently received some news that may have the company updating its revenue and earnings forecast. This in turn could cause analysts to reconsider their forecasts for the stock.
The specific news is that the FDA is expanding its Emergency Use Authorization (EUA) for Pfizer's Covid-19 antiviral drug, Paxlovid. The expansion will pharmacists to prescribe the drug, removing a key barrier for patients in need of treatment.
This means that it's possible that Pfizer may be updating its full-year forecast for $22 billion in revenue from Paxlovid. And if that's the case then it's also possible that analysts may revisit the company's price target either before or after Pfizer reports earnings on July 28.
PFE Stock Has More Going For It Than Covid-19 Vaccines
One of the winners in the Covid-19 pandemic was messenger ribonucleic acid (mRNA) technology. As Pfizer writes on their website, mRNA "is a molecule that contains the instructions or recipe that directs the cells to make a protein using its natural machinery."
Pfizer is one of the companies leading the way at using mRNA technology to take advantage of our body's natural protein-making abilities to make molecules to help prevent or treat diseases. And the Covid-19 vaccines from Pfizer and Moderna (NASDAQ: MRNA) are the first examples of mRNA technology receiving approval by the Food & Drug Administration (FDA).
The significance of this is that now the company can begin to expand upon the ability of mRNA technology. Currently that means more vaccines targeted to other infectious diseases such as influenza or shingles. However, in the future it may be used to treat other diseases such as cancer. And, via the company's partnership with Beam Therapeutics (NASDAQ: BEAM), Pfizer is working to develop mRNA technology as an approach to gene editing.
Building On Its Fundamental Strength
To make a long story short, we're entering a world of custom medicine and Pfizer is well positioned to take a leadership role. One reason for that is the significant cash balance that the company has built up through the success of its Covid-19 vaccines.
In 2021, the company generated free cash flow of $29.86 billion dollars. And Pfizer's total cash and short-term investments are at $31.07 billion, its highest level ever. With that level of strength, it's a near certainty that Pifzer will increase its dividend for the 13th consecutive year sometime later in 2022. And as of this writing, PFE stock is trading at an appealing price-to-earnings (P/E) ratio of just under 12 times earnings.
With that said, the long-term growth that Pfizer may deliver is years away. However, the company offers a strong balance sheet, stable earnings, a growing dividend, and the potential for significant growth with mRNA technology. Pfizer is a company to watch closely as it gets ready to report earnings.
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