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Here's Why Shares of Bristol Myers Squibb, Eli Lilly, and Pfizer Rocketed Higher This Week

By George Budwell – Dec 17, 2021 at 6:44AM

Key Points

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These three big-pharma stocks exploded higher this week.

What happened

Big-pharma stocks have generally had an outstanding week thus far. Through Thursday's closing bell, Bristol Myers Squibb (BMY 0.19%) shares have tracked higher by a respectable 8.2%, Pfizer (PFE 0.42%) stock is up by an eye-popping 17.5%, and Eli Lilly (LLY 0.44%) has seen its equity rise by a healthy 14.6%, according to data from S&P Global Market Intelligence.

As a result, Pfizer and Lilly's shares are both trading close to their 52-week highs right now, while Bristol's stock has regained a fair amount of lost ground after trending lower for most of 2021. These three elite pharma stocks have raced higher this week due to a mix of market-wide and company-specific factors. 

A toy rocket sitting on top of a pile of U.S. quarters.

Image source: Getty Images.

So what

On the market front, investors have clearly been turning to top dividend stocks as a hedge against inflation during the waning days of 2021. Pfizer, Bristol, and Lilly, for their part, are all well-known as top flight passive-income vehicles among investors, thanks to their rock-solid free cash flows, healthy near-term growth prospects, and proven commitment to rewarding loyal shareholders via a quarterly dividend. 

However, each of these companies also had an important material catalyst this week. Pfizer's stock received an analyst upgrade due to the strong commercial outlook for its oral coronavirus pill Paxlovid and COVID-19 vaccine Comirnaty. Taken together, these two COVID-19 products might rake in a mind-boggling $60 billion in sales next year.

Bristol kicked off the week by announcing a sizable increase to both its dividend and share-repurchase programs. Bristol, in effect, decided that its shares were too cheap after this year's steady decline. 

On Wednesday, Lilly boosted its 2021 annual-revenue forecast in a significant way, which immediately sparked a double-digit rally in the drugmaker's shares. Lilly's Wednesday rally was further fueled by an analyst upgrade from Cantor Fitzgerald's analyst Louise Chen.

Now what

Are these three big-pharma stocks still worth buying after this explosive week? Although Lilly and Pfizer should continue to be reliable passive-income vehicles in 2022 and beyond, Bristol's stock comes across as the most compelling buy among the three at this point.

At roughly 12 times forward-looking earnings, Bristol's shares remain undervalued within its peer group, especially for a household name that pays out an above-average dividend yield. By contrast, Lilly and Pfizer both sport far richer premiums and considerably lower dividend payouts after this week's massive rally.   

George Budwell has no position in any of the stocks mentioned. The Motley Fool owns and recommends Bristol Myers Squibb. The Motley Fool has a disclosure policy.

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