Pfizer's (PFE +1.25%) share price has fallen more than the S&P 500 so far this year. The big pharma stock is nearly 60% below its high set in late 2022. By most standards, Pfizer looks like the proverbial knife in the investing adage, "Don't try to catch a falling knife."
But could Pfizer stock be a smart pick to buy right now? I think there's more than one answer.
NYSE: PFE
Key Data Points
A definite "no"
If you're a growth investor, you probably won't be interested in buying Pfizer stock. And I don't make that assumption based on Pfizer's abysmal performance in recent years. The reality is that the drugmaker faces serious headwinds in the near future, too.
Pfizer's top-selling product last year was Eliquis, which it co-markets with Bristol Myers Squibb. The blood thinner generated revenue for Pfizer of nearly $7.4 billion last year. It loses patent exclusivity in the U.S. in 2027.
The company's fourth-highest moneymaker in its Vyndaqel franchise, which raked in close to $5.5 billion in 2024. Vyndaqel's key U.S. patent is scheduled to expire this year. Pfizer hopes to win a patent term extension, but even if it does, Vyndaqel will lose exclusivity in 2028.
Unfortunately, those aren't the only blockbuster drugs in Pfizer's lineup that could soon see their sales deteriorate. Other products with patents expiring over the next five years include Ibrance ($4.37 billion in sales last year), Xtandi ($2.03 billion in sales), and Xeljanz ($1.17 billion in sales).
A solid "yes"
We can safely cross Pfizer off the list for growth investors. But is the stock a good pick for value investors? I think the answer is a solid "yes."
Pfizer's shares trade at 8.6 times forward earnings. To put that metric in perspective, the average healthcare stock in the S&P 500 has a forward earnings multiple of 17.9. Pfizer's valuation is also lower than almost all of its big pharma peers.
Some might worry that Pfizer could be a value trap considering the patent cliff on the way. However, I don't think that's the case. Although the company will lose patent exclusivity for several top drugs, it also has newer products on the market, such as cancer therapies Adcetris and Padcev along with migraine drug Nurtec ODT, that should help offset the revenue declines. In addition, Pfizer's pipeline looks promising with 115 programs in clinical development, 37 of which are either awaiting regulatory decisions or in late-stage testing.
I'm not the only one who thinks Pfizer stock is cheap with its growth prospects factored into the mix. Pfizer's price-to-earnings-to-growth (PEG) ratio based on five-year earnings growth projections from analysts surveyed by financial markets data and infrastructure provider LSEG is a low 0.6. Any PEG ratio below 1.0 is considered to be attractively valued.
An emphatic "yes"
We haven't talked about income investors yet. Should they consider buying Pfizer stock? The answer is an emphatic "yes," in my opinion.
Pfizer's forward dividend yield currently stands at a hair above 7%. The company has increased its dividend for 15 consecutive years. I expect this streak will continue. Pfizer can easily cover the juicy dividend payout with its free cash flow. CFO David Denton confirmed in the fourth-quarter earnings call that the big drugmaker remains committed to maintaining and growing the dividend.
Only a handful of healthcare stocks offer a higher forward dividend yield than Pfizer. None of them is anywhere close to Pfizer's size. None has survived and thrived for over 175 years as Pfizer has, either.
Pfizer's growth picture isn't spectacular (although it's better than some might think). The stock's valuation is quite attractive. But the dividend the big pharmaceutical company offers is hard to beat.
