The novel coronavirus has put shares in the biopharma sector, including the pharma heavyweight Pfizer (NYSE:PFE), in the news. As a result, Pfizer stock gets significant investor and trader attention, especially due to its collaboration with BioNTech (NASDAQ:BNTX).
As early as March 17, the two companies informed the U.S. Securities and Exchange Commission that they “will jointly develop BioNTech’s mRNA-based vaccine candidate BNT162 to prevent COVID-19 infection… Collaboration aims to accelerate global development of BNT162, leveraging expertise and resources of both companies [and builds] on 2018 agreement to jointly develop an mRNA-based influenza vaccine.”
Recent research by Barney Graham of Vaccine Research Center, National Institute of Allergy and Infectious Diseases, National Institutes of Health in Bethesda, Maryland, highlights, “Because the human population is naïve to SARS-CoV-2, the consequences of repeated epidemics will be unacceptably high mortality, severe economic disruption, and major adjustments to our way of life. Therefore, the benefit of developing an effective vaccine is very high.”
There are currently over 40 vaccine candidates in clinical trials. However, the author also warns, “Vaccine development is usually measured in decades, so having access to approved vaccines available for large-scale distribution before the end of 2020 or even 2021 would be unprecedented.”
Therefore, is still too soon to know how the vaccine race may develop and finally affect the PFE share price. Nonetheless, Pfizer stock could be a strong addition to long-term portfolios of especially dividend investors. The current payout rate stands at over 4.1%.
Even without a successful vaccine, its current operations and drug pipeline mean relatively stable cash flows, which would be important for continued dividend payments. Here’s a closer look at the company.
How Recent Earnings Came
Pfizer is one of the world’s largest prescription drug companies. Its global portfolio includes medicines, vaccines and consumer healthcare products. It owns two of the world’s best-selling drugs: the breast cancer treatment Ibrance and the blood thinner Eliquis (co-owned by Bristol-Meyers Squibb (NYSE:BMY). Its branded drugs provide the company with reliable earnings and cash flow.
In late July, Pfizer released better-than-expected second-quarter earnings. Revenue of $11.8 billion meant a 9% year-over-year operational decline. The biopharma giant reported revenue in two segments:
- Biopharma (over 80% of revenue).
- Upjohn.
A fall in demand for several of the group’s drugs meant profits also declined by 32% YoY. However, it reported adjusted earnings of 78 cents per share, beating estimates. The company also raised its outlook for the rest of the year.
Vaccine headlines currently affect the fortunes of many shares in the biopharma space, whose prices have shot up exponentially in a matter of weeks. Year-to-date (YTD), shares in coronavirus therapy-hopefuls AstraZeneca (NYSE:AZN), BNTX, Moderna (NASDAQ:MRNA) and Novavax (NASDAQ:NVAX) are all up around 12%, 97%, 248%, and an eye-popping 2,800%, respectively.
On the other hand, YTD Pfizer stock is down around 6%, hovering at $37. So far since March, BNTX stock seems to be the beneficiary of the collaboration between the two firms. And that is another reason we like PFE shares at this point. Pfizer and BioNTech could well have an approved vaccine for emergency commercialization by the end of the year. The potential of a vaccine development and commercialization does not seem to have been factored into Pfizer stock, yet.
What to Expect From Pfizer Stock Soon
Citizens and governments around the globe would like to know when everything can or will go back to normal – as in the days prior to Covid-19. Meanwhile, market participants wonder which companies will be successful in coming up with a viable cure for the disease.
Many investors may hope to benefit from developments in vaccine research, but also want the safety of an established stalwart. In that case, they may want to put Pfizer stock on their radar. Its forward P/E and P/B ratios of 11.98 and 4.21 are also beginning to look attractive from a valuation standpoint. We’d consider buying the dips in PFE shares.
Would you like to have exposure to Pfizer stock without committing full capital to one company? Then you may also consider investing in an exchange-traded fund (ETF) that has the company as a holding. Examples would include the First Trust Morningstar Dividend Leaders ETF (NYSEARCA:FDL), the Health Care Select Sector SPDR Fund (NYSEARCA:XLV), the John Hancock Multifactor Health Care ETF (NYSEARCA:JHMH), or the Impact Shares Sustainable Development Goals Global Equity ETF (NYSEARCA:SDGA).
On the date of publication, Tezcan Gecgil did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
The author has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all 3 levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation. She also publishes educational articles on long-term investing.
