Pfizer (PFE +1.84%) shares gained 2.8% through 11:15 a.m. ET Thursday, and investors can thank the friendly bankers at RBC Capital Markets for that.
This morning, RBC removed its sell rating from Pfizer stock, upgrading the shares from "underperform" to "sector perform."
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Why RBC likes, not loves, Pfizer stock
So RBC isn't telling you to buy Pfizer stock... yet. But the banker is saying there's no longer a need to sell the big pharma giant. Why is that?
Basically, because RBC thinks the price is right on Pfizer shares after retreating 11% from their highs. RBC notes that investors have been cautious about Pfizer of late, worried that the company is lagging in the race to bring GLP-1 weight-loss drugs to market and at risk of revenue decline.
RBC isn't optimistic about Pfizer's chances of breaking Eli Lilly's (LLY +1.35%) and Novo Nordisk's (NVO +3.29%) stranglehold on the GLP-1 market. But balancing this risk is a pair of late-stage clinical trial cancer drugs Pfizer wants to bring to market: sigvotatug vedotin for treating lung cancer, and mevro for treating metastatic castration-resistant prostate cancer. RBC thinks success with these two drugs could add $1.2 billion and $2.7 billion, respectively, to Pfizer's revenue stream.
NYSE: PFE
Key Data Points
What's next for Pfizer stock
Near-term, Pfizer stock is still expected to struggle, with most analysts forecasting single-digit revenue declines this year and next -- and even steeper earnings declines.
That's not great news, but here's the thing: Even assuming earnings decline as forecast, to $3 a share or so, Pfizer stock only costs about nine times earnings. With a 6.7% dividend yield, Pfizer doesn't need to grow much at all, or soon at all, to justify its share price today.
At today's valuation, Pfizer is simply too cheap to sell.
