Will Pfizer Stock Outperform The Broader Market Post Coronavirus?

by Trefis Team
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Pfizer’s (NYSE:PFE) stock will likely outperform in the current coronavirus and oil price war crisis. So far, it has fared better than the broader markets, with the stock currently down by 19% since early February, after the WHO declared a global health emergency. In comparison, the S&P 500 is down by about 25%. Going by trends seen in the 2008-09 crisis, Pfizer’s stock will likely see a rebound from the current levels, in line with the broader S&P 500 index, as discussed in the below sections.

On Thursday, March 12, the stock markets saw their biggest sell off since 1987’s Black Monday. There were two distinct trends driving the sell-off. Firstly, the increasing number of coronavirus cases outside China is causing mounting concerns of a global economic slowdown. Secondly, crude oil prices plummeted by more than 20% after Saudi Arabia increased production. Pfizer stock fell 15% over the last 4 trading sessions, considering the impact that the outbreak and a broader economic slowdown could have on the company’s sales. The supply disruptions for drugs from China is the key cause of concern for pharmaceutical companies, such as Pfizer, in the near term.

Pfizer of late has been busy with restructuring of its businesses. The company divested its consumer healthcare business to merge with that of GlaxoSmithKline and formed a new entity. Similarly, it is in the process of merging its legacy drugs business with that of Mylan’s. This restructuring will allow Pfizer to focus on high growth drugs as well as biosimilars. As such, the company is expected to see strong earnings growth over the coming years, and any decline in stock prices should be seen as opportunity to buy for higher than broader market returns in the medium to long run, in our view. We currently don’t expect that impact on sales, if any, due to the supply disruptions from China, will last for more than a couple of quarters.

In this analysis, we take a look at how the company’s stock reacted to the economic crisis of 2008 and compare its performance with the S&P 500. View our complete dashboard analysis on 2007-08 vs. 2020 Crisis Comparison: Pfizer Stock Compared with S&P 500?

Pfizer Stock versus S&P 500 Over 2020 Coronavirus/Oil Price War Crisis

  • Pfizer’s stock declined by about 15% between Monday, March 9th, and Thursday, March 12th, and the stock is down by about 19% since February 1, after the WHO declared a global health emergency.
  • The S&P 500 declined by 16.5% between Monday, March 9th, and Thursday, March 12th, and it has fallen by 25% since February 1, after the global health emergency was declared by the WHO.
  • In comparison, rival Merck’s stock declined by about 13% since early February.

Pfizer vs. S&P 500 Performance Over 2007-08 Financial Crisis 

  • PFE stock declined from levels of around $15 in October 2007 (the pre-crisis peak) to levels of around $8 in March 2009 (as the markets bottomed out) and recovered to levels of about $12 in early 2010.
  • Through the crisis, PFE stock declined by as much as 45% from its approximate pre-crisis peak. This marked slightly lower decline as seen in the broader S&P, which fell by as much as 51%.
  • The stock saw massive recovery from the lows, rising by over 52% between March 2009 and January 2010. The growth was slightly higher than the S&P, which rose by about 48% over the same period.

Conclusion

  • While Pfizer’s stock has declined due to the Coronavirus/Oil Price War crisis, going by trends seen during the 2008 slowdown, it’s likely that it could bounce back strongly, when the crisis winds down, and the growth from lower levels could potentially be in line with the broader S&P.

For more detailed charts and a timeline of the 2007-08 crisis, view our dashboard analysis 2007-08 vs. 2020 Crisis Comparison: Pfizer Stock Compared with S&P 500.

 

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