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Which COVID Vaccine Stock Is the Best Pick?

By Keith Speights - Mar 24, 2021 at 6:05AM

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This question has multiple right answers.

It's no longer just Pfizer (PFE 3.59%) and BioNTech (BNTX -2.90%) versus Moderna (MRNA -4.97%) in the U.S. COVID-19 vaccine market. Johnson & Johnson's (JNJ 1.10%) single-dose vaccine is now available to Americans. AstraZeneca (AZN 2.59%) and Novavax (NVAX -8.57%) probably won't be too far away from winning Emergency Use Authorization (EUA) for their COVID vaccines.

In terms of stock performance, Novavax has been by far the biggest winner so far. But which of these COVID vaccine stocks is the best pick now?

Gloved hands holding COVID-19 vaccine vials

Image source: Getty Images.

Risk vs. reward

Any investment should be evaluated based on its potential risks and rewards. Each of these COVID vaccine stocks offers significantly different risk-reward propositions.

Novavax should still be viewed as the riskiest in the group. The company doesn't have a product on the market yet. Although Novavax seems likely to win EUA for its COVID vaccine relatively soon, there's always the possibility that an issue could arise. Novavax also could be most impacted by a global raw material shortage.

Investors might argue, though, about the next riskiest of these stocks. BioNTech doesn't have another late-stage candidate waiting in the wings, while Moderna plans to advance its cytomegalovirus vaccine into phase 3 testing this year. However, Moderna's valuation is a lot higher than BioNTech's, which is a risk in its own right.

AstraZeneca, Johnson & Johnson, and Pfizer are clearly less risky than the relatively smaller biotech stocks. Each of these three companies already generates billions of dollars in sales from existing products. They all have large pipelines. J&J should probably be viewed as the least risky because of its wide diversification across healthcare. 

But we can flip the story when it comes to potential rewards (i.e., growth prospects). Novavax could have the biggest near-term catalysts if it wins EUA for its COVID vaccine in the U.K. and in the U.S. Based on analysts' projections, J&J has the lowest growth prospects among these six stocks, followed by Pfizer then AstraZeneca.

Other considerations

Some investors aren't only looking for growth. Retirees, for example, often want income from their investments and therefore prefer dividend stocks. BioNTech, Moderna, and Novavax don't pay dividends and could be less attractive to income-seeking investors.

Johnson & Johnson has long been a favorite for income investors. It's a Dividend King with 58 consecutive years of dividend increases and will probably soon extend that streak by another year.

However, Pfizer handily beats both J&J and AstraZeneca based on dividend yield. AstraZeneca's dividend currently yields over 2.7%, which is better than J&J's yield of 2.5%. Pfizer's dividend yield, though, stands at 4.3%.

Pfizer will soon reduce its dividend when Viatris declares its inaugural dividend. However, this was part of the plan when Pfizer first announced it was going to merge its Upjohn unit with Mylan to form Viatris. Even after its dividend cut, Pfizer's yield should still remain well above that of both AstraZeneca and Johnson & Johnson.

I already mentioned Moderna's valuation as a potential issue. Investors who don't want to overpay for a stock probably won't like BioNTech or Novavax, either, based on their market caps in relation to their near-term financial prospects.

Pfizer ranks as the most attractively valued of these stocks based on forward earnings multiples. However, AstraZeneca claims the lowest price-to-earnings-to-growth (PEG) ratio of the group.

Best pick?

There really isn't a best pick among these stocks that's applicable for all investors. The dividend differences between the stocks underscore this reality. So instead of trying to choose a one-size-fits-all pick, I'll identify what I think are the best stocks for different kinds of investors.

Probably the easiest decision is for income investors. I think that Pfizer's dividend yield sets it apart. Having said that, you can't beat Johnson & Johnson's impressive track record of dividend hikes.

I suspect that value investors who aren't very trusting of analysts' five-year growth projections will like Pfizer the most of these six stocks. On the other hand, investors who place more confidence in those projections will probably prefer AstraZeneca because of its relatively low PEG ratio.

What about growth investors? My view is that Novavax is the best of these stocks to buy if you're looking for a short-term win. It's a more difficult call when it comes to long-term growth prospects, though. I think that Moderna's messenger RNA (mRNA) platform just might enable the biotech stock to be the biggest winner of all over the long run.

Some investors want a mix of everything -- solid growth, relatively low risk, dividends, and a reasonably attractive valuation. My pick for these investors is Pfizer. The big drugmaker checks off all the boxes.

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Stocks Mentioned

Pfizer Inc. Stock Quote
Pfizer Inc.
$52.47 (3.59%) $1.82
Johnson & Johnson Stock Quote
Johnson & Johnson
$175.85 (1.10%) $1.91
AstraZeneca PLC Stock Quote
AstraZeneca PLC
$66.21 (2.59%) $1.67
Novavax, Inc. Stock Quote
Novavax, Inc.
$53.42 (-8.57%) $-5.01
Moderna, Inc. Stock Quote
Moderna, Inc.
$136.25 (-4.97%) $-7.13
BioNTech SE Stock Quote
BioNTech SE
$163.00 (-2.90%) $-4.87
Viatris Inc. Stock Quote
Viatris Inc.
$11.80 (0.94%) $0.11

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

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