Pharmaceutical giant Pfizer (NYSE:PFE) was in the news for most of 2020 as a front-runner in the development of the novel coronavirus vaccine. Late last year, it announced its vaccine candidate’s completion, along with its German partner BioNTech (NASDAQ:BNTX). Despite finishing first in the race, Pfizer stock has dropped 1.7% of its value in the past couple of months. Concerns surrounding a second variant of the virus and the fallacy of the vaccine being a one-off are to blame.
Pfizer stock is trading at a discount, and the recent sluggishness presents a fantastic buying opportunity.
The market seems to believe that the Covid-19 vaccine is a one-off that will pay little dividends in the future. That belief couldn’t be farther from reality, considering the virus’s unique dynamics. The past few weeks have exhibited its mutative abilities and the need for reformulated vaccines, booster shots, and whatnot.
Furthermore, there is a lot more depth to Pfizer’s product pipeline even without the Covid-19 vaccine. Let’s look at Pfizer in more depth and what makes it an excellent investment at this time.
Pfizer’s Covid-19 Vaccine
The race for the Covid-19 vaccine came concluded in the last few months of 2020, with Pfizer finishing first. The vaccine has shown a 95% efficacy rate after its second dose and can be used for people aged 16 or older. Though it could trigger a range of side effects, most experts believe it’s mostly the immune system kicking into gear.
The company was previously targeting 100 million doses for the year but has now cut estimates to 50 million doses. However, it is investing heavily in bringing its manufacturing up to scale in response to the high demand.
A significant cause for concern with the vaccine is its effectiveness against new variants of the virus. A unique mutation of the virus called the N501Y was detected in the United Kingdom and South Africa. A recent study conducted by Pfizer and the University of Texas Medical Branch at Galveston showed that the Pfizer vaccine was effective against the N501Y mutation.
Add to that the need for regular booster shots and you have a massive on-going revenue stream for pharmaceutical companies such as Pfizer. The market is estimated to be worth more than $10 billion a year.
Future Outlook
With all the Covid-19 vaccine hullabaloo, investors seem to be thinking that Pfizer is a one-trick pony. The company is divesting itself of its slow-growing businesses and is focusing on becoming a premier drug development company. Pfizer has a range of other drugs in its pipelines, especially in oncology. Its oncology portfolio has a healthy five-year growth rate of more than 30% through 2020. Pfizer is targeting $15 billion in additional revenue from its new product pipeline by 2025.
Another growing segment for the company is rare diseases. The division includes several clinical programs that should gain approval within the next two years. It includes Pfizer’s hemophilia drug candidate, primary clostridioides difficile infections, and others. With a massive cash balance of more than $10.5 billion, I expect things to move quickly from the development phase to commercial launch.
The cherry on top is its current valuation, which is at least 14% lower than mean estimates. Pfizer stock is undervalued across virtually every metric, with double-digit differences with the industry averages. Add to that, its solid dividend yield of 4.25% makes it an even more intriguing investment.
Final Word on Pfizer Stock
Pfizer has had a stellar 2020, with a significant catalyst that could bring in billions in revenues. However, the market is surprisingly skeptical of its prospects, based on fallacies surrounding the Covid-19 vaccine dynamics.
Moreover, the company has a lot of depth in its product portfolio even without the Covid-19 vaccine. This will bear fruit in the future. Plus, Pfizer stock is trading at a discount, which further adds to its attractiveness at this time. Therefore, consider adding Pfizer stock to beef up your pharma portfolio.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University.
