Should You Pick Pfizer Stock At $30 After A 30% Fall In A Year?

PFE: Pfizer logo

Pfizer (NYSE: PFE) reported its Q4 results last month, with revenues missing but earnings beating the street estimates. The company reported revenue of $14.2 billion and an adjusted profit of $0.10 per share compared to the consensus estimates of $14.4 billion in sales and $0.22 loss per share. Pfizer has seen a meaningful decline in sales last year owing to lower demand for Covid-19 products. Its stock has also declined over 30% in the last twelve months and despite the fall, we think PFE is fairly valued. In this note, we discuss Pfizer’s stock performance, key takeaways from its recent results, and valuation.

PFE stock has seen a decline of 15% from levels of $35 in early January 2021 to around $30 now, vs. an increase of about 35% for the S&P 500 over this roughly three-year period. However, the decrease in PFE stock has been far from consistent. Returns for the stock were 60% in 2021, -13% in 2022, and -44% in 2023. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 24% in 2023 – indicating that PFE underperformed the S&P in 2023.

In fact, consistently beating the S&P 500 – in good times and bad – has been difficult over recent years for individual stocks; for heavyweights in the Health Care sector including LLY, UNH, and JNJ, and even for the megacap stars GOOG, TSLA, and MSFT. In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics.

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Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, could PFE face a similar situation as it did in 2023 and underperform the S&P over the next 12 months – or will it see a recovery? From a valuation perspective, PFE stock looks like it is appropriately priced. We estimate Pfizer’s Valuation to be $29 per share, close to its current levels of $28. Our forecast is based on a 13x P/E multiple for PFE and expected earnings of $2.14 on a per-share and adjusted basis for the full year 2024.

Pfizer’s revenue of $14.2 billion in Q4 was down 42% y-o-y, primarily due to lower sales of its Covid-19 products. The sales growth was 8%, excluding the Covid-19 products. A strong uptick in Vyndaqel and Abrysvo aided the overall sales. Pfizer’s adjusted net margin plunged over 2200 bps to 4.2% due to restructuring costs of $2.6 billion and SG&A and R&D expenses as a percentage of revenue rising y-o-y. Lower revenues and margin contraction resulted in earnings of $0.10 on a per-share and adjusted basis, compared to $1.14 in the prior-year quarter.

Looking forward, Pfizer expects its 2024 sales to be in the range of $58.5 billion and $61.5 billion, compared to $58.5 billion in 2023. This includes a $8 billion contribution from its Covid-19 products and a $3.1 billion contribution from Seagen. The company expects its bottom line to be in the range of $2.05 and $2.25 on an adjusted basis (versus $1.84 in 2023).

Although PFE stock has corrected over the last year, and the Seagen acquisition will help the company expand its sales and pipeline, with total sales contribution from Seagen expected to top $10 billion by 2030, we think its stock is appropriately priced around levels of $30. At its current levels, PFE stock is trading at 13x forward earnings, lower than the average value of 15x over the last five years. We think that a slight decline in valuation multiple is justified, given the significant decline in sales. Also, the Seagen acquisition has led to a significant 2x rise in the company’s debt levels to $72 billion, compared to $36 billion in 2022. Furthermore, the company is facing increased competition for its blockbuster vaccine – Prevnar – which saw its sales growth slow to 1.6% last year versus 20.2% growth in 2022. 
While PFE stock looks like it is fully valued, it is helpful to see how Pfizer’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.

Returns Feb 2024
MTD [1]
Since start
of 2023 [1]
Total [2]
 PFE Return 3% -46% -15%
 S&P 500 Return 5% 32% 127%
 Trefis Reinforced Value Portfolio 3% 41% 625%

[1] Returns as of 2/26/2024
[2] Cumulative total returns since the end of 2016

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