Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

Is Pfizer Stock a Buy?

By Jason Hawthorne - Jan 6, 2021 at 6:14AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The company is poised to begin delivering on its promise of growth and innovation.

Steve Jobs once told biographer Walter Isaacson, "Deciding what not to do is as important as deciding what to do." Pfizer ( PFE -5.14% ) has taken that message to heart, using a joint venture and merger to become a research-based pharmaceutical company with a singular focus on innovation.

Will the transformation be enough for shareholders who have seen the stock fall 12% since the end of 2018 while the S&P 500 has climbed almost 50% over those same two years? The new year is likely to provide the answer.

A hand drawing a balance in the air with price on one side and value on the other.

Image source: Getty Images

A strategic shift

Pfizer's moves have been in the works even before CEO Albert Bourla officially took the job. In 2018 as chief operating officer, he announced the company would reorganize into three business segments, saying that its competitive advantage was its pipeline of drugs in its innovative medicines unit.

Two big deals followed: a joint venture with GlaxoSmithKline combining the two companies' consumer health businesses, and the spinoff of Upjohn -- the off-patent drugs division -- in a merger with Mylan that created Viatris. The deals have left Pfizer smaller but more focused on developing best-in-class and first-in-class drugs.

It's understandable that Bourla wanted to devote resources to more innovation-driven areas. Upjohn followed a 7.2% decline in sales for 2018 with an 18% decline in 2019. Meanwhile, the company's biopharma division (what Pfizer kept in-house) experienced 5.7% and 5% sales growth in 2018 and 2019, respectively.

That improvement was led by cancer drugs, which grew 18.5% and 20.7% in the same two years, respectively. Even with a pandemic disrupting many healthcare operations, oncology saw year-over-year growth of 24.2%, 18.4%, and 17.5% in the first three quarters of 2020. There is still room to grow: Oncology only made up 27% of biopharma sales in the latest quarter.

2021 and beyond

Oncology isn't the only area showing bright spots. Sales of the company's drugs for rare diseases, such as hemophilia, have grown 30% in the first nine months of this year to $2.1 billion. During the same period, revenue for Eliquis, Pfizer's cardiovascular drug, was $3.7 billion, an 18% jump. Representing the inflammation and immunology category, arthritis drug Xeljanz has brought in $1.7 billion, 6.5% more than the previous year. Although vaccines were down almost 10%, that promises to turn around in the coming quarters as the company's coronavirus vaccine rolls out.

As of Dec. 31, 2020, 2.8 million Americans have received a COVID-19 vaccine developed by Pfizer and partner BioNTech or Moderna. Pfizer's and BioNTech's vaccine has demonstrated 95% efficacy -- a high bar to clear for competitors. Some estimates have Pfizer hauling in $19 billion in revenue in 2021 from the coronavirus vaccine alone, with $9 billion more over the following two years. Those same analysts are less sanguine about earnings, as they expect the proliferation of COVID vaccines to put pressure on prices, limiting profits.

With the company's transformation complete, and the tailwinds of an authorized COVID-19 vaccine, 2021 may offer investors a good look at what to expect from Pfizer in the years ahead. The company currently has a 4.25% dividend yield and trades at only 12 times the $3.00 per share analysts expect it to earn in 2021. That price-to-earnings ratio is 40% less than the 20 times earnings investors paid on average from 2010 to 2019.

While that doesn't necessarily mean the stock is worth more than it currently trades for, it does mean Wall Street is more negative on the company just as it is ready to show off the benefits of its strategic transformation. When balancing risk versus reward, the pharmaceutical stock looks like a buy if you expect current trends to continue.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Pfizer Inc. Stock Quote
Pfizer Inc.
PFE
$51.48 (-5.14%) $-2.79
GlaxoSmithKline plc Stock Quote
GlaxoSmithKline plc
GSK
$41.76 (1.24%) $0.51
Moderna, Inc. Stock Quote
Moderna, Inc.
MRNA
$265.33 (-13.49%) $-41.39
BioNTech SE Stock Quote
BioNTech SE
BNTX
$279.83 (-18.67%) $-64.23
Viatris Inc. Stock Quote
Viatris Inc.
VTRS
$12.44 (1.97%) $0.24

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
624%
 
S&P 500 Returns
140%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/07/2021.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Our Most Popular Articles

Premium Investing Services

Invest better with the Motley Fool. Get stock recommendations, portfolio guidance, and more from the Motley Fool's premium services.