Post-pandemic, the global bio-pharmaceutical sector, often overlooked, presents undervalued opportunities, notably in blue-chip stocks like Pfizer (NYSE:PFE). Following a 42% correction in the past year, PFE stock, with a 5.84% dividend yield, appears promising for 2024. The company anticipates $60 billion in revenue, signaling 9% year-on-year growth, supported by a compelling product pipeline.
Here are some more reasons why investing in PFE stock will bring you to ultimate highs in 2024.
The Excellent Bull Case
Pfizer, a major global pharmaceutical player, gained prominence with the development and distribution of medicines and vaccines. With 36 manufacturing facilities, 110 assets in the pipeline, and sales in 185 countries, Pfizer reported $68.53 billion in revenue over the past 12 months.
Pfizer’s recent stock sell-off raised its dividend yield to 5.84%, with over a decade of annual increases. Trading at 12.7 times 2024 earnings, Pfizer introduces new drugs and broadens its portfolio through acquisitions, like the $43 billion Seagen deal, expecting at least $3 billion in annual sales.
With $44 billion in cash and $64 billion in balance sheet debt, Pfizer maintains liquidity for uncertainties. Aiming for $25 billion in additional sales by 2030 through acquisitions and organic growth, Pfizer seeks to offset revenue declines from patent expirations and increased competition.
Focus on Obesity Market
Pfizer maintains an aggressive stance in entering the profitable obesity market, despite discontinuing a high-profile weight-loss drug due to severe side effects last year, according to CEO Albert Bourla on Monday. Bourla expressed confidence in Pfizer’s ability to compete and succeed in the obesity market.
Analysts projected the obesity drug market to reach $100 billion by the decade’s end. Eli Lilly (NYSE:LLY) and Novo Nordisk (NYSE:NVO) lead this market with Zepbound, Mounjaro, and Wegovy, part of the GLP-1 agonist drug class initially developed for diabetes. Despite market leaders’ success, Pfizer’s CEO, Albert Bourla, indicated reluctance in acquiring a late-stage obesity treatment due to the company’s focus on cost reduction and debt reduction.
The company is exploring licensing deals or early-stage weight-loss drugs. Recent challenges, including lower-than-expected COVID-19 vaccine sales, led Pfizer to cut $4 billion in costs and face investor concerns, resulting in share price declines to 10-year lows.
It’s a Big Buy
Pfizer, an undervalued pharma stock with a low multiple, offers investors a margin of safety. As part of a recession-resistant sector, it increased dividends by over 7% annually for 25 years, enhancing effective yield over time.
Citi places Pfizer on a “90-day catalyst watch,” expecting positive news in the next three months, potentially raising guidance and stock price. Despite projecting earnings at least 11% higher than guidance, Citi rates Pfizer as neutral.
If Pfizer achieves $2.50 per share earnings, with shares below $28, it results in a P/E ratio of only 11.2, supported by a 6.2% dividend yield. Given its promised growth and the recent stock drop, Pfizer appears attractive.
On the date of publication, Chris MacDonald has a LONG position in PFE. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
