Shares of healthcare giant Pfizer (PFE) have been on a roller coaster ride in recent years. The stock rose from less than $30 in March 2020 to $60 by December 2021, boosted by rising demand for its COVID-19 vaccine. Now, however, PFE is currently priced at $29.48, valuing the company at $162.56 billion by market cap.
Let’s see if Pfizer can stage a comeback in 2024.
Is Pfizer a Good Stock to Buy Right Now?
Among the largest pharmaceutical companies globally, Pfizer has gained significant traction over time due to the development and distribution of medicines and vaccines. With 36 manufacturing facilities and 110 assets in its current product pipeline, Pfizer sells its products in 185 countries, generating revenue of $68.53 billion over the last 12 months. Comparatively, the company generated over $100 billion in revenue in 2022, up from $42 billion in 2020, as the pandemic provided a massive tailwind for Pfizer.
Pfizer’s products, such as Comirnaty, a vaccine for COVID-19, and Paxlovid, which treats the virus, helped the company earn roughly $55 billion in 2022, resulting in record sales. Now, the pharma heavyweight expects total sales to range between $58.5 billion and $61.5 billion in 2024 - a forecast that disappointed Wall Street. Further, COVID-19-related product revenue is forecast at just $8 billion. After PFE provided its updated guidance for this year, the stock sold off in response.
Pfizer also highlighted plans to reduce costs by an additional $500 million, which suggests total costs may decline by $4 billion, shoring up its profit margins amid falling sales. In 2024, Pfizer expects adjusted earnings per share between $2.05 and $2.25, up from $1.55 per share in 2023 and $6.58 per share in 2022.
The Bull Case for Pfizer Stock
The recent sell-off in Pfizer stock has raised its dividend yield to a tasty 5.84%, and the company has raised its dividends each year for over a decade. PFE stock is also cheap at current levels, as it trades at 12.7 times 2024 earnings.
While falling COVID-19 sales will result in marginal top line growth for Pfizer, it continues to introduce new drugs to the market, and is widening its portfolio of products by accretive acquisitions.
For instance, Pfizer acquired cancer specialist Seagen for $43 billion, which should add at least $3 billion in annual sales. It ended Q3 with $44 billion in cash and $64 billion in balance sheet debt, providing Pfizer with enough liquidity to ride out an uncertain macro environment.
Pfizer aims to add $25 billion in additional sales by 2030 on the back of acquisitions and organic growth, allowing it to offset a portion of its revenue decline from patent expirations and rising competition.
What Is the Target Price for PFE?
Out of the 17 analysts tracking PFE, seven recommend “strong buy, one recommends “moderate buy,” and nine recommend “hold.” The average target price for PFE is $35.94, indicating an upside potential of 21.9% from current levels.
Pfizer is an undervalued pharma stock that trades at a low multiple, providing investors with a margin of safety. Part of a recession-resistant sector, it has raised dividends by more than 7% annually in the last 25 years, enhancing your effective yield over time.
On the date of publication, Aditya Raghunath did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
