Shares of COVID vaccine maker Pfizer (PFE) are steadily trending higher again following a past-year rollercoaster ride that shares sent into a correction on three separate occasions.
Indeed, the $300 billion biopharmaceutical behavior doesn’t get nearly as much press as it did a few years ago when it unveiled its profoundly-innovative vaccine Comirnaty. Undoubtedly, Pfizer was met with much praise following the miraculous marvel that’s since been taken for granted.
Pfizer’s COVID-19 Cash Cow May Have More Staying Power Than You Think
Though the COVID-19 pandemic seems to be winding down in America, it’s important to remember that the pandemic hasn’t quite ended yet. China is just reopening its doors from its latest round of strict lockdowns.
The nation’s zero-COVID policy may be viewed as extreme, given the implications on the world’s supply chains and its own economy. Regardless, the reality of seasonal COVID-19 vaccines could become the new normal, as a move from pandemic to endemic proves difficult.
COVID-19 is unlikely to be eliminated. It mutates too fast, and it spreads too stealthily. America has learned to live with it, and the disastrous lockdowns of 2020 are likely out of the cards, even if a future variant proves more virulent than those in the past.
As rolling up our sleeves to receive a COVID-19 shot becomes an annual or semi-annual tradition, Pfizer’s COVID-19 business may be a cash cow for years. Perhaps it could be a durable business requiring Wall Street analysts to revisit their financial models.
In addition, Pfizer’s COVID-19 pill Paxlovid could evolve into a stable cash flow stream. Reportedly, US Paxlovid production is poised to expand. The concept of “rebound COVID” has been a hot topic surrounding Pfizer’s oral treatment. However, I don’t expect such phenomena will hurt demand. At the end of the day, Paxlovid is one of few options for those who’ve already been infected by the coronavirus.
Even as the COVID-19 business winds down, Pfizer remains one of this market’s most innovative companies out there, and the 12.3 times trailing earnings multiple does not do its justice.
With a new growth mindset and investment in other intriguing businesses, Pfizer stock seems eager to prove it’s worthy of a much higher multiple. With a stellar management team and discounted growth capabilities, I remain bullish on PFE stock as it attempts to revisit its highs near $60 per share.
However, on TipRanks, PFE receives a Smart Score rating of 3 out of 10, indicating the potential for the stock to underperform the broader market. Therefore, this is something to consider.
Did Pfizer Just Score a Bargain with Biohaven Pharmaceuticals?
Amid the market sell-off, Pfizer announced its acquisition of Biohaven (BHVN) in a deal worth $11.6 billion. The firm, which has a robust migraine business, gives Pfizer yet another cash-cow business that diversifies its already impressive drug portfolio. More importantly, such intriguing therapies could act as a foundation that feeds future innovations in Pfizer’s pipeline.
Biohaven is in much better hands under Pfizer’s leadership. Pfizer isn’t merely acquiring for the sake of making headlines. The company collaborated with Biohaven for many months before the deal was announced.
Even after the deal, Pfizer sports a strong balance sheet, leaving the door open for potential future deals. As the COVID-19 business continues to generate impressive sums of cash, other deals may also be in the cards if management can find the right fit at the right price.
Don’t Discount mRNA Innovations
Finally, Pfizer is an mRNA technology pioneer that could fuel the next blockbuster treatment beyond COVID-19.
Undoubtedly, much attention has been focused on mRNA’s potential to combat diseases such as cancer. Though such mRNA vaccines are many years away, those looking to bet on the long-term potential of mRNA can find such exposure with Pfizer – and at a ridiculously-low multiple.
Though mRNA technology may seem akin to a tech company’s moonshot bet, I do think the wildcard upside potential of Pfizer’s mRNA talents is thrown in for free at these levels.
Wall Street’s Take
Turning to Wall Street, PFE stock comes in as a Moderate Buy. Out of 15 analyst ratings, there are six Buy recommendations and nine Hold recommendations.
The average Pfizer price target is $58.92, implying upside potential of 10.2%. Analyst price targets range from a low of $50.00 per share to a high of $76.00 per share.
The Bottom Line on Pfizer Stock
Even as the hype fades, Pfizer continues to move forward with its growth strategy. Whether we’re talking about M&A or organic initiatives, the current state of the COVID-19 business, or moves to improve the state of the pipeline, Pfizer is firing on all cylinders.
At such depressed levels, the risk/reward is tough to top up, given the caliber of technologies that PFE stock will grant you exposure to.