Pfizer Inc. (PFE) — PFE stock closed 1.4% lower on Thursday after being down almost 2% intraday. The cause of the selling was a bogus press release from an unidentified source that said the global pharmaceutical company would no longer increase its drug prices. Considering the implications of such a move, though, the sell-off was relatively minor and offers traders a good entry point.
Pfizer markets numerous top-selling drugs and has a solid pipeline of new products. In November, Pfizer agreed to acquire rival Allergan plc (AGN) for $160 billion in a deal that, if approved, will create the world’s largest drugmaker. Also, since the combined company will be headquartered in Ireland, Pfizer is expected to benefit from favorable tax treatment.
On Feb. 2, S&P Capital IQ Equity Research raised its opinion of PFE stock to “Buy” from “Hold.” Its analysts have a 12-month target of $40 on shares.
Capital IQ estimates earnings of $2.25 per share in 2016 and $2.58 per share in 2017.
Turning to the chart, PFE stock declined from a double-top at about $36 last year to a low just above $28 in February. Shares hugged their 50-day moving average as they fell.
A high-volume breakout, accompanied by a buy signal from my proprietary internal indicator, the Collins-Bollinger Reversal (CBR), smashed PFE stock through both the bearish resistance line and the 50-day moving average on March 22. Since then, it has hugged the breakout line.
Thursday’s minor decline gives us an opportunity to buy PFE stock around $29 with a trading target of $34. If successful, this trade will deliver a gain of roughly 15%. Investors should also consider buying PFE stock for capital gains and income. The company pays an annual dividend of $1.20 per share for a current forward yield of just over 4%.
