Have you been pondering over buying Pfizer stock lately? If the answer to that is yes, you were probably not very impressed by how the market reacted to the pharma giant’s latest earnings release. The less than impressive fourth quarter earnings also led to a drop in Pfizer’s stock price. However, investors who read beyond the headlines, were buoyed by the numbers and chose to invest their money in the stock of the pharma giant. Most of them would probably hold on to them for a decade. Let’s find out more about the Pfizer stock and whether should you invest in it or not.
Pfizer Stock: Should I Buy It Now?
Vaccine sales will give a cash boost to Pfizer
Pfizer (NYSE: PFE) announced that the estimated sales of the COVID-19 vaccine BNT162b2 were going to amount to $15 billion. The vaccine was developed in a joint effort with BioNTech (NASDAQ: BNTX). Once BioNTech’s share of sales and operating costs are taken into account, Pfizer expects a profit margin percentage in the high 20s.
Even for a pharma giant like Pfizer, around $4 billion worth of pre-tax earnings is a massive deal. However, a lot of people have rightfully asked what happens to the bottom line after everyone gets vaccinated once? During its fourth-quarter earnings call, Pfizer also told investors that demand for COVID-19 vaccines appears durable thanks to emerging variant strains of the virus. Annual updates to Pfizer and BioNTech’s coronavirus vaccine could end becoming a consistent source of revenue for Pfizer.
Pfizer has a great R&D team
For many decades, Pfizer has featured the pharma industry’s largest research and development budgets. However, that large sum of money hasn’t always been put to great use. The public opinion of Pfizer’s skill in developing new drugs isn’t what one would call, “extremely favourable” over the course of time.
Between 2010 and 2015, Pfizer’s clinical trials were less successful than the industry average. However, since then, the success rate of the clinical trials has jumped to 21%, which is more than 2.5 times the industry average, in short, exceptional.
Pfizer has focused operations
In 2019, Pfizer created another company for its popular over-the-counter drugs such as Advil. In 2020, Pfizer went through a merger of its collection of drugs that have been around long enough to lose patent-protected market exclusivity with Mylan, forming Viatris.
So Pfizer can now focus its resources on creation of new revenue sources, a lot of which can start contributing to the top line very quickly. In April, the Food and Drug Administration is expected to make an approval decision regarding abrocitinib, a drug that can make a landmark breakthrough in the treatment of Eczema.
The FDA is also reviewing an application for a 20-valent pneumonia vaccine that is even more effective than Pfizer’s successful Prevnar 13 brand of vaccine. The new vaccine can protect against seven other sources of infection. New COVID-19 sales notwithstanding, Prevnar 13 is the world’s top-selling vaccine at the moment, amassing a mammoth $7 billion in annualized global sales.
2021 will also mark the year where Pfizer’s Braftovi can be approved as a first-line treatment for a genetically defined group of advanced-stage colon cancer patients. As of today, the drug is only approved to treat colon cancer patients in the second line setting. If it’s moved to the first line setting, it is estimated to add upwards of $2 billion in revenue for the pharma giant’s top line in just a matter of a few years.
Should I Buy Pfizer Stock?
Based on the recent costs, Pfizer shares have traded at just 13.7 times the firm’s 2021 expected earnings. This is even before the potential COVID-19 vaccines have been accounted for. However, this isn’t a lot for a firm that has been expecting to grow on the bottom line at a double-digit percentage this year and steady growth over the long run. COVID-19 vaccine sales aside, Pfizer has been expecting its top-line revenue to rise at an annual growth rate of 6% or better through 2025. For Pfizer investors, there is good news as the pharma giant is already on the way to an expected revenue boost of 6% per year in 2021. Once the COVID-19 vaccine numbers come in, Pfizer is most likely going to be loaded with cash and pay out good dividends to all of its investors. As of now, the Pfizer stock is already offering a 4.5% yield based on the most recent prices. This can result in these shares becoming a significant source of income for you for retirement. So yes, you should buy Pfizer stock now.