What happened
Shares of pharma giant Pfizer (NYSE: PFE) jumped in Tuesday-morning trading, up a solid 2% as of 11:15 a.m. ET.
You can thank Citigroup for that.
Image source: Getty Images.
So what
In a note out this morning, Citi raised its price target on Pfizer stock by 24%, to $57 a share, and placed the stock on a "positive Catalyst Watch," reflecting the banker's belief that Pfizer might go even higher.
Although anxiety regarding the COVID-19 pandemic has died down a bit of late, Citi maintains what it calls an "underlying pessimistic view" about this sneaky virus and its ability to spin off new variants that can elude old vaccines. For the time being, Citi's view is that people are feeling too complacent in the absence of "the next virulent variant," reports TheFly.com. And in this context, cash-strapped governments are likely to skimp on purchases of Pfizer's Paxlovid COVID pill in the near term.
Any flare-up in infections, however, could cause a boom in Paxlovid orders. Additionally, the analyst believes that China might place a "material Paxlovid order" to help it emerge from lockdowns sometime in the next year.
Now what
Meanwhile, from a dollars-and-cents perspective, Citi argues that Pfizer stock looks inexpensive at just a little over 13 times trailing earnings and a bit less than eight times forward earnings (with a sizable 3.1% dividend yield besides).
Granted, the big question is whether those earnings will hold up post-COVID -- and indeed, most analysts forecast generally declining earnings over the next year on the belief that those earnings will not hold up. Any big boost in Paxlovid orders, however, for whatever reason, could be just the catalyst needed to disrupt those expectations and return Pfizer stock to growth mode.
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