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Is Pfizer's Attractive Valuation Enough to Invest in the Stock?
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Drug giant Pfizer (PFE - Free Report) is trading quite cheap after its stock took a beating last year once the pandemic ended. The stock is trading at a discount to the industry and is also trading below its 5-year mean. Going by the price/earnings ratio, the company's shares are currently trading at 10.25 forward earnings, lower than 19.08 for the industry and the stock’s 5-year mean of 11.37.
Image Source: Zacks Investment Research
If you consider the price/sales ratio, its forward sales multiple of 2.63 is lower than its five-year average of 3.28 and the industry's multiple of 7.17.
With the stock trading at a discount now, we delve into the company’s growth drivers and challenges to evaluate if investors should park their cash in Pfizer at this time.
Sales of PFE’s COVID Products Declining
Sales of Pfizer’s COVID products, Comirnaty and Paxlovid, declined steeply in 2023 due to lower demand following the end of the pandemic. In 2024, Pfizer expects revenues from Paxlovid and Comirnaty to decline further. The 2024 revenue guidance includes $8.5 billion in potential combined revenues for Paxlovid and Comirnaty, significantly lower than the combined revenues of $12.5 billion for 2023.
PFE’s New Drugs & Seagen Acquisition to Drive Growth
Though COVID revenues are declining, Pfizer’s non-COVID operational revenues improved in the first half of 2024, driven by its key in-line products like Prevnar, Vyndaqel and Eliquis, new launches like Abrysvo, Velsipity, Penbraya, newly acquired products like Nurtec as well as those acquired from Seagen (December 2023). The trend is expected to continue in the second half.
Last year was a record year for Pfizer in terms of FDA approvals, as it received nine new medicine/vaccine approvals. This year too, it gained approval for some interesting new products like two gene therapies for hemophilia, Hympavzi (marstacimab) and Beqvez/Durveqtix (fidanacogene elaparvovec).
Pfizer’s new products/late-stage pipeline candidates and newly acquired products, including those acquired from Seagen, position Pfizer strongly for operational growth in 2025 and beyond. Pfizer expects 2025 to 2030 revenue CAGR to be approximately 6%.
Pfizer expects the acquisition of Seagen to contribute more than $10 billion in 2030 risk-adjusted revenues with potential significant growth beyond 2030.
PFE Enjoys a Strong Position in Oncology
Pfizer is one of the largest and most successful drugmakers in the field of oncology. Its position in oncology was strengthened with the addition of Seagen. Oncology sales comprise more than 26% of its total revenues. Its oncology revenues grew 23% on an operational basis in the first half of 2024, driven by drugs like Xtandi, Lorbrena, the Braftovi-Mektovi combination and Seagen’s cancer drugs. Pfizer has ventured into the oncology biosimilars space and markets six biosimilars for cancer. Pfizer also advanced its oncology clinical pipeline in 2024, with several candidates entering late-stage development. By 2030, it expects to have eight or more blockbuster oncology medicines in its portfolio.
Pfizer’s stock has risen 9.9% in the past six months compared with an increase of 8.1% for the industry. The stock is also trading above its 200-day moving average.
PFE Stock Outperforms Industry
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for earnings has risen from $2.59 to $2.66 per share for 2024 over the past 60 days, while that for 2025 has risen from $2.83 per share to $2.86 per share.
PFE Estimate Movement
Image Source: Zacks Investment Research
Stay Invested in PFE Stock
After a couple of tough years, it seems that Pfizer’s worst slowdown is over now, and the company is gradually making a comeback.
Pfizer faces its share of challenges, the key being declining sales of its COVID-19 products. Pfizer also expects a significant impact from the loss of patent exclusivity in the 2026-2030 period, as several of its key products will face patent expirations. However, its non-COVID drugs and potential contribution from new and newly acquired products have started to drive growth, with the trend expected to continue.
The company continues to pay regular dividends. Its dividend yield stands at around 6%, which is quite impressive. Also, Pfizer expects cost cuts and internal restructuring, including layoffs, to deliver savings of $4 billion in 2024. Huge profits from its COVID products strengthened its cash position. The funds are being used to make acquisitions, increase dividends, buy back shares and reduce debt.
Consistently rising estimates indicate investors’ optimistic outlook for growth. Those who own this Zacks Rank #3 (Hold) stock may stay invested to see how Pfizer’s new growth drivers perform. Investors with a long-term horizon may consider buying this pharmaceutical giant’s stock at the present attractive valuation.
Image: Bigstock
Is Pfizer's Attractive Valuation Enough to Invest in the Stock?
Drug giant Pfizer (PFE - Free Report) is trading quite cheap after its stock took a beating last year once the pandemic ended. The stock is trading at a discount to the industry and is also trading below its 5-year mean. Going by the price/earnings ratio, the company's shares are currently trading at 10.25 forward earnings, lower than 19.08 for the industry and the stock’s 5-year mean of 11.37.
If you consider the price/sales ratio, its forward sales multiple of 2.63 is lower than its five-year average of 3.28 and the industry's multiple of 7.17.
The stock is also much cheaper than other large drugmakers like AbbVie (ABBV - Free Report) , Novo Nordisk (NVO - Free Report) and Lilly (LLY - Free Report) .
With the stock trading at a discount now, we delve into the company’s growth drivers and challenges to evaluate if investors should park their cash in Pfizer at this time.
Sales of PFE’s COVID Products Declining
Sales of Pfizer’s COVID products, Comirnaty and Paxlovid, declined steeply in 2023 due to lower demand following the end of the pandemic. In 2024, Pfizer expects revenues from Paxlovid and Comirnaty to decline further. The 2024 revenue guidance includes $8.5 billion in potential combined revenues for Paxlovid and Comirnaty, significantly lower than the combined revenues of $12.5 billion for 2023.
PFE’s New Drugs & Seagen Acquisition to Drive Growth
Though COVID revenues are declining, Pfizer’s non-COVID operational revenues improved in the first half of 2024, driven by its key in-line products like Prevnar, Vyndaqel and Eliquis, new launches like Abrysvo, Velsipity, Penbraya, newly acquired products like Nurtec as well as those acquired from Seagen (December 2023). The trend is expected to continue in the second half.
Last year was a record year for Pfizer in terms of FDA approvals, as it received nine new medicine/vaccine approvals. This year too, it gained approval for some interesting new products like two gene therapies for hemophilia, Hympavzi (marstacimab) and Beqvez/Durveqtix (fidanacogene elaparvovec).
Pfizer’s new products/late-stage pipeline candidates and newly acquired products, including those acquired from Seagen, position Pfizer strongly for operational growth in 2025 and beyond. Pfizer expects 2025 to 2030 revenue CAGR to be approximately 6%.
Pfizer expects the acquisition of Seagen to contribute more than $10 billion in 2030 risk-adjusted revenues with potential significant growth beyond 2030.
PFE Enjoys a Strong Position in Oncology
Pfizer is one of the largest and most successful drugmakers in the field of oncology. Its position in oncology was strengthened with the addition of Seagen. Oncology sales comprise more than 26% of its total revenues. Its oncology revenues grew 23% on an operational basis in the first half of 2024, driven by drugs like Xtandi, Lorbrena, the Braftovi-Mektovi combination and Seagen’s cancer drugs. Pfizer has ventured into the oncology biosimilars space and markets six biosimilars for cancer. Pfizer also advanced its oncology clinical pipeline in 2024, with several candidates entering late-stage development. By 2030, it expects to have eight or more blockbuster oncology medicines in its portfolio.
PFE’s Stock Outperformance, Rising Earnings Estimates
Pfizer’s stock has risen 9.9% in the past six months compared with an increase of 8.1% for the industry. The stock is also trading above its 200-day moving average.
PFE Stock Outperforms Industry
The Zacks Consensus Estimate for earnings has risen from $2.59 to $2.66 per share for 2024 over the past 60 days, while that for 2025 has risen from $2.83 per share to $2.86 per share.
PFE Estimate Movement
Stay Invested in PFE Stock
After a couple of tough years, it seems that Pfizer’s worst slowdown is over now, and the company is gradually making a comeback.
Pfizer faces its share of challenges, the key being declining sales of its COVID-19 products. Pfizer also expects a significant impact from the loss of patent exclusivity in the 2026-2030 period, as several of its key products will face patent expirations. However, its non-COVID drugs and potential contribution from new and newly acquired products have started to drive growth, with the trend expected to continue.
The company continues to pay regular dividends. Its dividend yield stands at around 6%, which is quite impressive. Also, Pfizer expects cost cuts and internal restructuring, including layoffs, to deliver savings of $4 billion in 2024. Huge profits from its COVID products strengthened its cash position. The funds are being used to make acquisitions, increase dividends, buy back shares and reduce debt.
Consistently rising estimates indicate investors’ optimistic outlook for growth. Those who own this Zacks Rank #3 (Hold) stock may stay invested to see how Pfizer’s new growth drivers perform. Investors with a long-term horizon may consider buying this pharmaceutical giant’s stock at the present attractive valuation.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.