What goes up usually comes down. That's exactly what Pfizer (PFE -0.19%) shareholders have seen in recent days.
For a brief period last week, the big pharma stock was up by a double-digit percentage for the year. It didn't last long. Pfizer's shares fell after its COVID-19 vaccine won U.S. emergency use authorization (EUA), giving up most of its year-to-date gains.
With this downward trend, should you sell Pfizer stock now? Or could is that a premature decision that you could come to regret?
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Peak COVID?
There are several reasons you might consider selling Pfizer right now. Perhaps the most persuasive is that the company has reached "peak COVID," in a sense.
Pfizer and its partner BioNTech (BNTX -0.45%) achieved a huge milestone a few weeks ago by winning authorization for coronavirus vaccine BNT162b2 in the U.K. The two companies soon followed up with a victory in Canada. And, as already mentioned, the U.S. granted EUA to Pfizer's and BioNTech's COVID-19 vaccine last week.
But the moment in the sun for BNT162b2 as the only authorized coronavirus vaccine in the U.S. isn't likely to last very long. The FDA could give EUA to Moderna's vaccine, mRNA-1273, within a matter of hours. Other COVID-19 vaccines could also soon be on the way.
These rival vaccines don't have the same ultracold storage requirements that BNT162b2 has. Some could hold other advantages over Pfizer's vaccine. For example, Johnson & Johnson is evaluating a single-dose vaccine in late-stage studies.
Bernstein analyst Ronny Gal expects BNT162b2 to be the biggest winner among coronavirus vaccines in 2021, raking in more than $14 billion. However, Pfizer has to split that revenue with BioNTech. Gal projects that sales will decline in subsequent years.
Some investors hopped aboard the Pfizer train because of the potential for its coronavirus vaccine. That train could very well start to go downhill pretty quickly.
A broader perspective
There is a much more optimistic view about Pfizer's prospects in the coronavirus vaccine market, though. We don't know yet how long any of the COVID-19 vaccines provide protection against infection by the novel coronavirus. If it turns out that vaccinations will be required annually or even more frequently, Pfizer's fortunes could be better than expected.
It's also quite possible that the other coronavirus vaccines in development don't come close to matching the safety and efficacy of BNT162b2. Predictions of the decline for Pfizer's vaccine could be greatly exaggerated.
More importantly, Pfizer has a lot more going for it than just BNT162b2. The company's growth prospects look better than they have in years now that Upjohn has been spun off and merged with Mylan into a new entity, Viatris.
Pfizer's lineup includes products that should deliver solid revenue growth. Blood thinner Eliquis, autoimmune disease drug Xeljanz, and Vyndaqel, which is approved for treating a type of heart failure caused by a rare genetic disease, especially stand out. The company's pipeline is also loaded with potential winners.
A few numbers to consider
In the company's Q3 conference call, Pfizer CEO Albert Bourla reaffirmed that the drugmaker expects a five-year compound annual growth rate (CAGR) for revenue of at least 6% on a risk-adjusted basis and for adjusted earnings per share (EPS) of around 10%.
The key words to note there are "risk-adjusted basis." Pfizer isn't banking on all of its pipeline candidates achieving their revenue targets. Actually, Bourla stated that the company only needs around 40% of its non-risk-adjusted projected pipeline revenue to hit its CAGR goal.
Importantly, those projections don't include any potential revenue from BNT162b2. They also don't factor in the possibility of additional growth fueled by future deals.
If you hold onto your Pfizer stock, you could see 10% adjusted EPS growth that could be even higher with success for the company's COVID-19 vaccine. You'll also receive solid dividends to boot.
Are there stocks that can deliver stronger growth than Pfizer? Absolutely. But my view is that Pfizer gives investors a really good shot at obtaining market-beating total returns this decade. You could sell the stock now, but I suspect that you'll regret that you did down the road.
