Spoiler alert: In this story, I am going to get very grumpy about the current state of Pfizer (NYSE:PFE). In this sense, I look at Pfizer stock as a cautionary tale of what happens when investors get hooked on the promise of astronomical gains — even if the outfit has no product of which to speak — to the detriment of a company that just made one of the biggest product breakthroughs in history.
I should understand what’s at work. And I do. Yet I don’t. Wall Street, the financial news cycle and investors at large boast the collective attention span of three goldfish swimming in a bowl of espresso. Taking the long view is no longer fashionable.
The kind of buy-and-hold value investing that made Warren Buffett and Charles Brandes billionaires has suddenly become a fool’s game. Thanks in part to the likes of Robinhood, many now relish the goal of plunking down $100 on some pseudo-hotshot stock that grabs a 2,000% return in 30 days.
Yes, Pfizer is a $209 billion big-pharma battleship. Investors and analysts often see such titans as stodgy and stuck. With Pfizer stock, slow and steady will always be slow and steady. Middling performance won’t change for anything.
And yet, I sense something very, very wrong when the company that just cracked the vaccine code on the greatest public health threat in a century, along with BioNTech (NASDAQ:BNTX), doesn’t get as much love as some dubious also-rans that were never going to produce a vaccine and more than likely knew it.
All that mattered for them was practicing the right spin and dangling the carrot of easy investment pickings.
I am not sure that is a disease we can cure.
Pfizer Stock and the Analyst Enigma
Even the analysts in this case seem to confound expectations. In the first quarter of 2020, when many companies were staving off a bloodbath, Pfizer beat analyst expectations.
Then it did it again in the second quarter. And it pulled off a three-peat in the third quarter. Despite this, 15 analysts call Pfizer stock a hold. For those counting, that’s 25% more than three months ago.
At least the six who call it a buy tip the scale towards a consensus rating of overweight. And with a price target of $41.64, investors could realize a modest gain of 11% if that share price comes to pass.
Except that … well, do-gooder values aside, I would think there’s much more value for those who hold Pfizer stock when the company is sitting on a product it cannot produce fast enough.
As recently as Dec. 19, The New York Times reported that the current administration “recently asked Pfizer to sell it enough doses to cover an additional 50 million Americans, but Pfizer said it had already found customers around the world for all the doses it can produce until around the middle of next year.”
Here’s my investor math: Huge medical breakthrough, plus huge PR and reputation breakthrough, plus insatiable demand for new product equals (or should equal) … something. Something positive, anyway. Here’s what we have instead: borderline investor apathy.
When the Numbers Don’t Add Up
Over the last six months, Pfizer stock rose a modest 20%. But since Dec. 8, it’s off 11%. Year over year, shares have remained flat. Meanwhile, Inovio Pharmaceuticals (NASDAQ:INO) has seen its shares rise 180% year over year. The company did a great job promoting its vaccine candidate INO-4800, all right. There was just one problem: Inovio hasn’t brought so much as a sock puppet to market in its 41 years.
PFE even boasts a very attractive price-to-earnings ratio of 24.38. So what do investors have against Pfizer stock? I see this in part as symptomatic of our times, when investor perceptions can trump reality and investor sentiment can turn a frog into a prince and vice versa.
We can see analogies in how Wall Streeters treat the giant automaker Ford (NYSE:F). The company has been around forever. It just produced an astounding hybrid version of its F-150 pickup and an all-electric Mustang Mach-E. Both were named 2021 Truck of the Year and Car of the Year respectively by Green Car Journal. Yet Ford gets no love from investors. None. Year over year it’s down 5%.
Compare that to Nikola (NASDAQ:NKLA). Here we have a disgraced EV company that has admitted to faking footage of a fully operational prototype humming down the road. The car was actually an empty shell coasting down a hill. Nikola stock year over year? Up 66%.
If You Have It, Hold It … But Don’t Hold Your Breath
Go ahead. Sit back and say, “But that has nothing to do with investing in Pfizer stock.” How wrong you would be. The rest of the world is swept up in the irresistible tide of ESG investing. The initials stand for the values of Environmental and Social practices, along Governance (how a company’s board and internal practices reflect positive values such as gender and racial diversity).
To date, ESG investing accounts for more than $20 trillion in assets under management. And yes, the goal is to not only support businesses that do good, but that do well financially. I see Pfizer stock as hitting a World Series grand slam on the “E” and “S” parts of ESG.
If you could care less and money’s your thing, it should still reap incalculable respect — and profit. Don’t trust me as much as The New York Times, which as I mentioned reports that Pfizer will sell and distribute every single vial of vaccine it can possibly produce through at least the middle of 2021.
Yet somehow, the calculus is off. I hold Pfizer stock but find myself struggling to make a case for it. That is because investors will do what they will do and I believe a great many of them have already made up their minds to pass.
That has created, at least in part, a self-fulfilling prophesy where investors greeted a company’s blazing-hot moment in the sun with stifled yawns. Even if the rest of the world rejoiced.
As for inspiring investor confidence and enthusiasm, I’m not sure what Pfizer can do for an encore. I don’t think there is an encore. Suffice to say that if you own Pfizer stock, you’ll want to hold it as that $41.64 price target seems more than doable.
After that, who knows? At least for this pharma’s financial fate, maybe this is what they mean by “the cure is worse than the disease.”
On the date of publication, Lou Carlozo held long positions in PFE and BNTX.