1 Hot Growth Stock to Buy, and 1 to Avoid (For Now)

When you're hunting for attractive stocks to buy, it's often helpful to make comparisons between companies in the same line of work to tease out the leaders from the laggards. On that note, Pfizer (PFE 2.40%) and BioNTech (BNTX 0.74%) worked together to develop and commercialize their coronavirus vaccine, Comirnaty. But while the two companies are splitting the profits from sales of the jab, their share prices are radically diverging.

Though Pfizer's shares are up 7.6% in the last 12 months, handily outperforming the market's decline of nearly 4%, BioNTech's stock is down by a stomach-wrenching 55%. And that massive performance gap between the pair is likely to continue for at least a few quarters -- here's why.

Buying the winner and avoiding the loser

Some investors may be wondering why BioNTech's and Pfizer's stocks can behave so differently when they both contractually profit the same amount from their commercializing Comirnaty. The answer is that for Pfizer, coronavirus vaccines accounted for only $8.8 billion of its $27.8 billion in second-quarter revenue. In BioNTech's second quarter, practically 100% of its product sales, totaling around $3.3 billion, were attributable to its share of jab revenue.

BioNTech is dependent on the gyrations of the global demand for coronavirus vaccine doses, while Pfizer has plenty of other medicines to sell and new projects to commercialize no matter what's going on in the vaccine market. That's especially important at the moment, as Pfizer is seeing its sales of Comirnaty decline sharply year over year in the U.S., with other developed markets potentially soon to follow.

But the company's strength relative to BioNTech goes way beyond Comirnaty, or other coronavirus-targeted products like the Paxlovid antiviral pill. In the remainder of this year alone, it'll report on no fewer than seven pivotal readouts from its clinical trials. That's seven different opportunities for the market to react favorably to data that's highly pertinent to the pharma's future earnings. In contrast, BioNTech will only be reporting one readout before the end of the year, from its solid-tumor program in phase 1 trials, and it only has one other update on the radar in the first half of 2023.

In other words, BioNTech doesn't have the catalysts in its pipeline to make its stock perform well in comparison to Pfizer, so it isn't the same kind of growth stock. While it's true that the company's trajectory over the last three years has seen its share price balloon by more than 1,030%, the next three years will almost certainly be much more difficult. And that's not even counting some of the headwinds the biotech might face that its big pharma collaborator won't even need to think about.

Economic matters only make the situation harder

BioNTech is based in the European Union, and its coronavirus vaccine manufacturing operations are powered by natural gas. The company claims that it should be able to find alternative energy sources for manufacturing if needed, and that it shouldn't be affected by transient shortages of natural gas. But management admits that the risks posed by a prolonged or deep shortage can't be ruled out. And in case you've lost track of current events, a natural gas crisis in Europe is brewing at this very moment, and could be getting worse quite soon, depending on geopolitical developments.

It's reasonable to expect BioNTech to be able to find alternative energy sources if natural gas continues to be in short supply. The only problem is that those alternatives are likely to be a bit more expensive, leading to margin compression and making it even less appealing in comparison to Pfizer.

Of course, such shortages are bound to be temporary, and some investors might even perceive the situation as an opportunity to buy BioNTech shares when the market is pessimistic about the company's future. But why invest in a business that's likely to be underperforming for the next few years and facing stiff headwinds, when you could invest in an unencumbered competitor with more opportunities on the horizon, like Pfizer?