Shares of large-cap biopharma firm Pfizer (PFE), the firm leading the fight against COVID-19, have been sliding of late and for no real good reason. The stock finds itself down around 13% from its peak, which was just north of $60 per share. Indeed, the year has not started as well as many had hoped.
With its COVID-19 oral antiviral treatment Paxlovid recently gaining approval from Health Canada, the Federal department responsible for helping Canadians maintain and improve their health, Pfizer may have the stage set for another solid year.
Indeed, Paxlovid has been on the radar of many investors for quite some time now. Still, with many investors' sights set on a potential move into endemic territory later this year, the latest Paxlovid approval news may not have been as much of a needle mover as it could have been.
Cheap Hedge Against Worsening of the Pandemic
Though there remain numerous uncertainties regarding when the pandemic will end, I still think Pfizer stock possesses one of the most favorable risk/reward trade-offs in the choppy biotech space today. Further, if 2022 is not the year the economic reopening picks up further traction, perhaps due to a new variant more devastating than Omicron or Delta, Pfizer is also a worthy pandemic hedge at a pretty modest multiple.
COVID-19 boosters and Pfizer's pill should boost sales (pardon the pun) in 2022, but just how much of a boost is the million-dollar question. Ultimately, the next step of this pandemic will determine just how much Pfizer will stand to gain from its impressive one-two punch in Paxlovid and Comirnaty, Pfizer's COVID-19 vaccine.
With the Canadian government agreeing to buy 1 million courses of Paxlovid, Pfizer is poised for a sizeable sales jolt in the first half. It is also worth noting that Canada is diversifying its orders, with plans to also purchase 500,000 courses of Merck's (MRK) offering, Molupiravir.
Though many hope the pandemic will end this year, it remains nearly impossible to know the course COVID-19 will take. That's why estimates for booster shots and antiviral pill sales may be skewed conservatively this year. That said, after Pfizer's shares corrected, I think the price is quite low, ahead of what could be another year of gains for the COVID-19 vaccine pioneer. As such, I remain bullish.
Not Just COVID-19 Makes Pfizer Attractive
There's a lot of uncertainty clouding the broader markets right now. Investors are no fans of such hazy clouds of uncertainty. That's a significant reason why the broader biotech sector has been under so much pressure in recent months. Even Pfizer, a modestly-valued behemoth with one of the most robust drug pipelines out there, couldn't resist falling into a correction.
There's no question that such pipelines can be make or break for a biotech firm. Given Pfizer's size and greater diversification, though, I do think the firm represents certainty in an otherwise profoundly uncertain industry and market environment.
Even if COVID-19 were to go endemic and sales of Paxlovid and Comirnaty would stagnate rapidly in the back half of 2022, with a massive drop in the cards through 2024, the company still has a lot of cash-flow-generative drugs to fall back on. Further, the robust pipeline could yield a success that could act as fuel for Pfizer stock's next leg higher.
While it's never a good idea to bet that one product in a pipeline will be a potential blockbuster, I do think investors should remember that Pfizer is one of the most innovative biotechs these days. It did pull back the curtain on an incredible vaccine, and its latest innovation, Paxlovid, could be an invaluable tool to ending this horrific pandemic. Given that, Pfizer is one of the most innovative companies, period. And its ability to ramp up on production has likely improved drastically.
Wall Street's Take
According to TipRanks’ consensus analyst rating, PFE stock comes in as a Buy. Out of 19 analyst ratings, there are 9 Buy recommendations and 10 Hold recommendations.
As for price targets, the average Pfizer price target is $59.83, implying an upside of 13.3%. Analyst price targets range from a low of $46.00 per share to a high of $76.00 per share.
The Bottom Line on Pfizer Stock
The sales boost from Pfizer's COVID-19 products will not last forever. As the pandemic winds down, so too will sales of Comirnaty and Paxlovid. That said, it's difficult to pinpoint with any degree of precision when the sharp demand decline will follow the initial sales surge.
Add the firm's other intriguing offerings and its robust pipeline into the equation, and it becomes more apparent that Pfizer seems too cheap for its own good, trading at just 4.32 times sales and 15.7 times trailing earnings.
The Pfizer of the modern era is showing signs that it's a wonderful company with staying power. For that reason, it's one of my top picks in the biotech industry after its recent fall. I think analysts aren't nearly as bullish as they should be, with more Hold ratings than Buy ratings at the time of writing.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.