Last year was a stellar one for Pfizer (PFE 0.19%). The company benefited from strong demand for its COVID-19 vaccine pushing its revenue to more than $100 billion for the first time in its history. But the problem for the stock is that investors have always been looking beyond just COVID, and that uncertainty has led to Pfizer's shares often trading at a discount.
In January, Pfizer announced not only its latest earnings results but also a forecast for 2023, which tells investors what they already knew was inevitable: a sharp decline in sales is coming.
Pfizer's revenue is to come between $67 billion and $71 billion this year
A decline in revenue isn't a shock given that concerns surrounding COVID appear to be fading, but the reason for the soft numbers isn't entirely due to demand. CEO Albert Bourla says that there is also a timing issue and that the government simply already has sufficient vaccines on hand. "Much of that demand is expected to be fulfilled by products that were delivered to governments in 2022 and recorded as revenues last year."
According to Pfizer's forecasts, sales from the COVID-19 vaccine, Comirnaty, will total $13.5 billion this year and Paxlovid, the pill, will bring in about $8 billion, for just under $22 billion combined. By comparison, together, they totaled $56.7 billion in 2022.
But the company believes that COVID-related revenue will increase in 2024, blaming the soft 2023 numbers on the government's existing stockpile. The Food and Drug Administration is also contemplating the possibility of recommending an annual COVID booster moving forward. If that happens, that can ensure Pfizer generates revenue from its COVID vaccine for the foreseeable future. However, the topic remains up for debate.
When excluding COVID revenue, Pfizer projects that its growth rate this year will be between 7% and 9%. That's a modest amount, and growth investors may be craving much more than that. But in the long run, there could be more potential products out there that help bring in additional revenue for the business.
The company has plenty of growth opportunities still out there
Pfizer's COVID products have played such a significant part in the company's business over the past few years that it makes it hard to not think of it as just another COVID stock. But the reality is that Pfizer has much more potential than it can tap into.
As of Jan. 31, the company had 37 projects in phase 2 trials in its pipeline and another 23 that were in phase 3. Even if all of those projects don't pan out and result in blockbuster drugs, the point is that Pfizer isn't just relying on COVID. It has also been acquiring businesses in recent years to bolster its portfolio. Bourla previously estimated that through a combination of the company's acquisitions and its pipeline, Pfizer would be able to add $25 billion to its top line by 2030.
Is Pfizer's stock a buy?
Pfizer isn't a risky investment but there is a great deal of uncertainty in its future. After posting record-breaking revenue in 2022, it may be a struggle for the company to ever get back to those highs again -- if at all.
At 10 times forward earnings (which are based on analyst estimates), Pfizer's stock is trading at a discount, signifying the nervousness investors have in buying the healthcare stock today. But given the company's rich history and how effectively it adapted to the COVID-19 pandemic and brought an effective vaccine to market so quickly, that should give investors confidence in its ability to continue to evolve to changing conditions.
The stock is near its 52-week low and with a solid dividend yield of 3.7%, it's an underrated investment that long-term investors should consider adding to their portfolios today.
