Key Points
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Pfizer’s declining revenue and questions about its growth have weighed down the stock in recent years.
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The company, however, has been bolstering its pipeline and has some exciting assets.
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Its valuation is incredibly low for what’s still a blue chip stock.
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One of the most puzzling stocks these days is Pfizer (NYSE: PFE). Although it’s not generating tons of money from its COVID vaccine and pill anymore, the business is still doing well. There are question marks about its growth prospects, but the company hasn’t been standing idle; instead, it’s been expanding its pipeline through acquisitions.
However, investors continue to undervalue the stock. While it has risen 12% this year, which is technically far better than the S&P 500‘s decline of 3% thus far, its valuation should be much higher than it is today. Here’s why Pfizer is a no-brainer buy at its current price point, and why in five years’ time, you might regret not buying it today.
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The business has some promising growth opportunities
A quick look at Pfizer’s financials, and you might get an idea as to why the stock has been struggling so badly. From more than $101 billion in revenue in 2022 to less than $63 billion this past year, the company’s top line has shrunk drastically over just three years. But that’s to be expected, as the boost it received from its COVID vaccine and pill was temporary.
The big picture, however, is that this is a company that has been preparing for the slowdown and that has been arming itself with assets and drugs that would make its future far brighter. In 2023, it acquired Seagen, a promising oncology company, for $43 billion, for its antibody-drug conjugates that target cancer cells, potentially transforming cancer treatment options in the future. Last year, it acquired GLP-1 drugmaker Metsera for up to $10 billion, as it looks to take advantage of opportunities in the anti-obesity drug market.
The reality is that Pfizer just needs one home run, one drug that can help transform its growth prospects and convince investors that it can get back to growing its business in the long run. It currently has over 100 drug candidates in development in its pipeline.
There’s risk with Pfizer, but there can also be significant upside
Pfizer is facing near-term uncertainty due to patent cliffs on some of its top drugs, but it also has a boatload of assets in its pipeline that could help offset that. This is the type of stock that’s worth taking a calculated risk on. Its valuation is so low that you can’t help but see the mammoth upside that may lie ahead. At less than 10 times its estimated future earnings, investors are heavily discounting the stock.
Although it has been rallying recently, it’s still trading around 2013 levels. This is a stock I believe will soar far higher over the next five years, and investors who overlook it today could regret it.
Should you buy stock in Pfizer right now?
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David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Pfizer. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
