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Is Pfizer Stock Still a Top Buy for 2021?

By Anirudh Shankar - May 23, 2021 at 4:11AM

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Here's why you might want to consider adding this best-in-class stock to your portfolio.

Pfizer (PFE -1.40%) has been in the news a lot lately, and for good reason. Its partnership with BioNTech to produce a COVID-19 vaccine was massively successful, resulting in huge demand. This was highlighted by a recent order of 1.8 billion vaccine doses from the European Union. Just in the past three months, Pfizer stock is up nearly 16%, while the SPDR S&P 500 ETF is up only 5.88%.

There are still a lot of things to be excited about with Pfizer, including future growth in its vaccine segment and its overall business. With all this positive news, here's why you might want to buy Pfizer stock in 2021.

A healthcare worker administers a vaccine.

Image source: Getty Images.

Vaccine dominance

Pfizer hit it out of the park in 2020: Along with BioNTech, the company produced a very successful COVID-19 vaccine, which is currently in high demand all over the world. As of March 2021, Pfizer had orders for 1.22 billion doses., and with this new order of 1.8 billion doses from the EU, total orders of Pfizer's vaccine have climbed over 3 billion doses. This would be enough to vaccinate a sizable portion of the world's population.

Pfizer has done very well with revenue from its vaccine, reporting on May 4 that it expects the vaccine to generate $26 billion in revenue in 2021 alone. The company has contracts with several governments, including Canada's, to supply vaccines through 2024. Pfizer brought in almost $42 billion in total revenue for 2020, so just this year's coronavirus vaccine sales will exceed 60% of 2020 revenue.

Beyond the COVID-19 pandemic, Pfizer intends to expand its vaccine business using the mRNA technology that it used for its coronavirus vaccine. The company plans to expand into the influenza vaccine business, trying to create an mRNA vaccine for the flu. The U.S. influenza market is $7.3 billion, an attractive opportunity for Pfizer to pursue.

A cheap valuation

Over the past few months, Pfizer has been trading at a rather cheap valuation. After hovering at a forward price-to-earnings ratio of about 13 for much of the last year, the stock currently trades at a forward P/E of just 10.88, putting it on sale today.

Analysts' consensus estimate for Pfizer's earnings per share (EPS) this year is $3.68. Multiplying consensus EPS by a P/E of 13, in line with the company's historical average, we could be looking at a price of nearly $48 per share -- an upside of almost 20%. Pfizer also currently offers a dividend yield of 3.84%, almost triple what the SPDR S&P 500 ETF offers at just 1.34%.

A cheap stock price with lots of potential to rise, and a dividend yield well above average, is a combination that should make investors very optimistic about Pfizer stock in 2021.

Anirudh Shankar owns shares of Pfizer. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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$48.58 (-1.40%) $0.69

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