Less than four miles — 3.8 to be precise — separate the New York Stock Exchange at 11 Wall St. and the world headquarters of Pfizer (NYSE:PFE) at 235 W. 42nd St. That makes it oddly convenient if you want to take the walk to buy some PFE stock in the flesh. That is, if you could do such a thing. You see, the exchange is closed to the public.
In a way, that’s all too fitting. For the short, short distance between PFE and the NYSE might as well span an ocean of investment logic. Behold, on opposite shores: the easing of pandemic pains and the increasing of capital gains. Put another way, Wall Street more than occasionally embodies that puckish maxim “no good deed goes unpunished.”
Yes, Pfizer finished first in partnership with BioNTech (NASDAQ:BNTX) in the fight to crack the world’s greatest health threat in more than a century. But that can hardly protect it from another virus of sorts it cannot inoculate against. To wit: Investors want more. And more. And more. “What to do for an encore?” You tell me. So where does that leave investors, exactly?
PFE Stock and the Great Disconnect
On Dec. 8, 90-year-old Margaret Keenan, a UK grandmother, became the world’s first person to receive Pfizer’s novel coronavirus vaccine as part of a mass inoculation. Mark well the date; PFE stock also hit its 2020 high of $42.56. And it’s been downhill ever since. If you were to pronounce the ticker symbol as “feh,” then it’s truly a case of “What the PFE?”
Today, Pfizer trades 14% lower, and skittish analysts are acting like the company is hacking up a lung and refusing to wear a face mask. Yes, they’ve set a price target of $41.77, pennies shy of that 2020 peak. But the lion’s share of firms — 13 of 19 — call PFE stock a hold.
Call me thick, but this makes no sense. None. Bupkis. Zilch. Zero. PFE stock has beaten analyst expectations for three consecutive quarters. What’s more, Morgan Stanley projects that Pfizer will pocket $19 billion in Covid-19 vaccine revenue in 2021. That’s on top of the estimated $975 million it realized in 2020 and not factoring in what it will make from Covid-19 shots in 2022 and 2023.
Burned on Its Earnings
Grumpier investment types will moan that PFE stock doesn’t reflect the kind of earnings investors deserve. They point to how Pfizer sales declined 4% in 2019 to $51.75 billion. So maybe the market is waiting for future quarterly reports to turn that tide. Here’s the good news: Where 2021 is concerned, $19 billion is close to 40% of 2019’s figure.
Investors Business Daily cautions that PFE stock has a weak earnings per share rating: 68 out of a possible 99. That’s an understandable objection — until you put Pfizer up against all of the booming companies in the Covid-19 vaccine hunt that lacked any earnings whatsoever. And they still made investors incredibly rich.
The ranks of the profitless include Inovio Pharmaceuticals (NASDAQ:INO), which saw its shares jump 197% in 2020, and Novavax (NASDAQ:NVAX), up, up, up more than 2,400%. So what’s all this stuff about EPS (earnings per share) ratings? In the year of the Covid-19 stock gold rush, it proved meaningless. No profit? No problem! No approved drugs in your company’s history? No problem! Just ask Inovio’s executives. As far as new drug development goes, they’re 0-for-41 years.
Hold and Fold
Now I’m beginning to sound grouchy myself. Make no mistake: PFE stock failed to ignite the kind of gambling fever among Wall Streeters that shares in the smaller pharmas did. Some tiny companies had everything riding on a pandemic vaccine. Pfizer, by contrast, reported at least one high-profile failure in October. That month, its top-selling drug Ibrance failed a second, large Phase 3 trial in early-stage breast cancer.
Nor are analysts optimistic about the next earnings report, due Feb. 2. They’re forecasting EPS to drop by 24% over the last quarter. So even if PFE stock beats the street, those who follow the company might well howl about profits sagging. No such scrutiny bothers the firms that follow Novavax. Five of seven call a buy. But hey, what’s a little moving of the bar between friends?
As metaphors go, you could call Pfizer the “A” student who gets read the riot act when she gets a “B.” Meanwhile, the underachievers get showered with adoration based on potential as opposed to performance. Yes, that’s unfair. But that’s the way of the world (and the world of Wall Street) for you.
In the meantime, the tea leaves look pretty clear on this one. If you own PFE stock, hold onto it long enough to see it inch toward that price target, which will help short- and long-term investors alike. Then lock in your small profit or break-even and sell. Before Covid-19, PFE stock was a sluggish performer.
And if you’re hoping to enjoy some sort of fabulous Covid-19 bounce, I’d say this: Even in bringing us the shot used ’round the world, Pfizer has missed its best shot.
On the date of publication, Lou Carlozo held long positions in PFE and BNTX.