Following the Monday holiday, the equities sector got off to a slow start for the Jan. 17 session, with Pfizer (NYSE:PFE) conspicuously declining more than 3% in the early afternoon hours. Unfortunately for the pharmaceutical stalwart, a Wells Fargo analyst downgraded PFE stock, citing a need for a readjustment of expectations surrounding its coronavirus-related solutions. Moreover, the Covid-19 crisis presents a mixed bag for Pfizer, raising relevancy questions.
Specifically, Wells’ Mohit Bansal downgraded PFE stock to “equal weight” from “overweight” yesterday. In response, shares gapped down 2.7% to start the Tuesday session. Adding insult to injury, Bansal also trimmed his price target for Pfizer shares to $50 from $54.
“We think Pfizer needs a Covid reset before the stock could work again,” Bansal stated in a research note. To be fair, he commended management’s efforts to bolster revenue through research efforts and buyouts. “However, it could take time for investors to appreciate this given future (mergers and acquisitions) is an important component.”
Covid Solutions Not Panning Out for PFE Stock
At the heart of the downgrade is Pfizer’s potentially disappointing results for its Covid-19 treatment and vaccine solutions. According to Investor’s Business Daily, “The U.S. government likely has more than 12 million courses or 60% of its drug supplies still in hand. This could make 2023 sales lower than Pfizer stock analysts expect. Further, demand in China likely won’t take off without national reimbursement.”
Ultimately, Bansal anticipates that Pfizer’s antiviral Covid pill Paxlovid will generate $8.2 billion in sales this year. This forecast falls short of Wall Street’s upper spectrum estimate for $13.2 billion, posing serious concerns for PFE stock.
On the other end, Pfizer’s Comirnaty vaccine – which it partnered with BioNTech (NASDAQ:BNTX) to develop – may ring up $13.4 billion in sales. Regrettably, this too would fall short of analysts’ consensus target of $17.8 billion.
Furthermore, PFE stock faces a mixed bag regarding relevancy to the Covid-19 crisis. On the positive front (at least from Pfizer’s relevancy angle), the virus remains a stubborn challenge. For instance, the current combination of Covid-19, the seasonal flu and respiratory syncytial virus (RSV) effectively created a “tripledemic.” Should Covid become endemic, it may coalesce with other infectious diseases, sparking public health concerns.
On the other hand, weekly trends in Covid-19 cases demonstrate that, aside from a huge spike in late 2021 and early 2022, incidences have trended downward since early January 2021. Therefore, PFE stock may face risks if the underlying enterprise is too dependent on its Covid solutions.
Why It Matters
For transparency, it’s not entirely clear how much the analyst downgrade impacted PFE stock. Other Covid-related companies such as BioNTech, CureVac (NASDAQ:CVAC) and Novavax (NASDAQ:NVAX) also suffered declines on Tuesday. Even Moderna (NASDAQ:MRNA) dipped a hair under parity at time of writing.
For PFE stock specifically, analysts maintain a consensus “moderate buy” view, breaking down as four buys and seven holds. Further, their average price target stands at $53.10, implying 14.5% upside from the current price point.
On the date of publication, Josh Enomoto 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.