The top pharmaceutical company in the world, Pfizer (NYSE:PFE) stock has gained massive popularity after the introduction of the Covid-19 vaccine. Pfizer was looked up to by many in the industry because it made a life-saving drug and this is a huge deal.
It generated strong revenue and cash flow for the company. PFE stock has gained 50% in the last year and is undervalued, in my opinion.
Despite the massive success in the industry, the stock only went as high as $61 in December and has declined since then.
It is currently exchanging hands at $52. Whether you own the stock or are planning to take a position, here are two reasons you should continue holding PFE stock.
Solid Business
Pfizer reported solid quarterly numbers which show how well the company has performed in the pandemic. A major contributor to the number is the Covid-19 vaccine and the company is making the most of the situation.
It reported a quarterly revenue of $23.8 billion and full-year revenue of $81.3 billion and an adjusted earnings-per-share (EPS) of $1.08. However, the sales of internal medicine fell to $2.24 billion and the hospital sales were flat at $1.88 billion. The company paid $8.7 billion of a cash dividend in the year, rewarding shareholders for their loyalty and trust in the business.
The company expects $22 billion in sales of Paxlovid in the year but this number could go higher as the year progresses. This figure is only based on the current deals made by the company. If Pfizer manages to exceed this number, there is no stopping PFE stock. It expects full-year revenue of $98 billion to $102 billion.
Biden’s Push To PFE Stock
President Joe Biden recently announced the Test to Treat initiative which allows Covid-19 positive patients to receive a free course of Paxlovid. It helps prevent hospitalization and the pills will be provided on the spot at no cost. This will push the company’s revenue numbers higher and impact the bottom line.
Pfizer is already at the top spot in the race to develop vaccines for Covid-19 and it has started the Phase 2/3 study of Paxlovid to evaluate the safety and efficiency in participants. Further, the company will also submit data to the U.S. regulators for the fourth shot of its Covid-19 vaccine and this will have an impact on the future of the company.
It has also begun the mid-to-late stage study of the antiviral Covid-19 pill in children aged 6-17 years. Its Paxlovid pill is already authorized for emergency use in the U.S. among kids older than 12 as well as high-risk adults and no other antiviral treatments are approved for younger children yet. This means Pfizer has an early-stage advantage here.
The pandemic may have subsided but it is not over yet and the demand for vaccines is constantly going to grow across different countries. Besides the Covid-19 vaccine, Pfizer has a lot in the pipeline and one should not judge its potential based on a single vaccine or pill. It already has 27 products in Phase 3 which will help the company sustain growth in the long term.
The Bottom Line
Pfizer has reported better than expected numbers but there are concerns about the sustainability of the business in the long term. Depending on the Covid-19 vaccine or pill will not help the company in the long term, however, this is not the stock you should write off.
The company is fundamentally strong and is rewarding shareholders with solid dividends. 2022 looks good for the company and it could surprise investors with a blowout quarter.
The numbers are proof that its business is growing and if you are looking for a bargain, this is the stock to buy and hold. It may not hit the triple-digit anytime soon but you will continue to enjoy the dividends in the long term.
On the date of publication, Vandita Jadeja did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
