PFE with Nobias technology: Pfizer Shares Are Up Nearly 60% In 2021. Can The Company Continue That Momentum Into 2022?
In an article titled, “3 COVID Stocks That Will Pay You Rich Dividends in 2022” which was recently published by a trio of authors at The Motley Fool, including George Budwell, who is a Nobias 4-star rated contributor, began by saying, “If you want to play it safe in 2022, it's not a bad idea to buy a healthcare company. Pharmaceutical stocks will likely do well, regardless of what the economy is doing. Healthcare is a necessity, so there probably won't be a slump here.” And, as far as safe healthcare stocks go, a slew of highly rated analysts have recently posted bullish takes on Pfizer shares moving forward.
In this article, we wanted to take a look to see whether or not Pfizer, which has been a top performer in 2021, is likely to continue its winning streak into 2022 as well. In the COVID-19 stocks article highlighted above, Budwell’s colleague, Patrick Bafuma, commented on Pfizer shares saying, “The company boasts over 55% year-to-date gains, more than double the S&P's 27% thus far. That does not even include the pharma's 2.7% dividend yield.”
Bafuma continued, putting a spotlight on PFE’s attractive dividend yield, writing, “And the behemoth's dividend is about as safe as it gets. Its 2022 first-quarter payout will be the 333rd consecutive quarterly dividend paid. Going into the fourth quarter, it had roughly $30 billion on hand -- and that's after already paying out $6.5 billion in dividends through the first three quarters of the year. Suffice to say, the dividend is safe for the foreseeable future.”
PFE Dec 2021
In a separate article, Budwell recently highlighted PFE’s outperformance as well, saying that Pfizer was the second best performing big pharma stock during the year thus far in 2021 with its 45.8% gains, trailing only Eli Lilly (LLY) which has posted 47% gains.
This article was posted on December 1st, 2021. Since then, both PFE and LLY have continued their strong rally. As of today, PFE is still trailing LLY for the lead, but its year-to-date returns have increased to 59.49% (compared to LLY’s 61.75% gains). The success of PFE’s COVID-19 vaccine is the primary catalyst for its near-term success.
Budwell wrote, “In fact, the Pfizer and BioNTech COVID-19 vaccine Comirnaty will likely end 2021 as the best-selling pharmaceutical product of all time from a single-year standpoint.” And, as Budwell points out, he expects COVID-19 vaccines and treatments to continue to propel PFE shares higher into 2022 as well. He wrote, “Comirnaty [which is the name of the COVID-19 vaccine that Pfizer developed with partner BioNTech] is slated to haul in no less than $36 billion in sales in 2021. To put this eye-popping revenue figure into perspective, AbbVie's Humira, which was the best-selling pharma product last year, generated $20.4 billion in sales in 2020.”
Budwell pointed out that “During Pfizer's third-quarter earnings presentation, management said that Comirnaty is already on track to rake in $29 billion in sales in 2022.” And, he notes, this Q3 guidance was before the Omicron variant began to spread. The resurgence of COVID-19 via Omicron is likely to boost vaccine sales even higher. And, as Budwell points out, in 2022, it won’t just be vaccine sales which make up Pfizer’s COVID segment, but also antiviral pills as well. He wrote, “While its vaccine sales should continue to be stellar in 2022, the company will almost certainly get another major boost from its oral coronavirus pill Paxlovid.” Budwell said that he believes that Paxlovid “could very well book upward of $24 billion” in sales during 2022, which would also be astounding from a historical perspective in terms of single year drug sales.
Jonathan Phillip, a Nobias 5-star rated analyst, recently covered Paxlovid in an article at Nasdaq.com. Regarding the drug, Phillip said, “Pfizer is also making another push on the pandemic front today as well. Simply put, the company is now planning to submit an application to the U.S. FDA for its coronavirus treatment, Paxlovid. Based on Pfizer’s interim data, the oral antiviral pill reduced Covid hospitalizations and deaths by a whopping 89%.”
Phillip believes that this approval could boost the entire bio-tech sector in investors’ minds moving forward. Something else that could augment valuations in the bio-tech space is merger and acquisition activity. And with that in mind, we return to Budwell’s article, because he says that longer-term, Budwell says that he believes potentially large-scale M&A is in Pfizer’s future.
Budwell wrote, “With nearly $30 billion already in the bank and more on the way, shareholders can probably expect the company to pursue a handful of in-licensing deals, multiple bolt-on acquisitions, and maybe even a megamerger.” When the COVID-19 pandemic ends, there will be a very large revenue shortfall for PFE to deal with. And, using the cash flows that its vaccine and anti-viral sales are generating in the present to buy longer-term growth is an obvious way for this management team to make sure Pfizer remains relevant in a post pandemic world.
Alex Carchidi, a Nobias 5-star rated analyst, also recently published a bullish piece on Pfizer, highlighting its strong 2021 total returns and its absolute dominance in the COVID-19 vaccine arena. Carchidi wrote that Pfizer’s “Comirnaty is the world's most widely approved and the most purchased by far, and nothing else even comes close. It held a 74% share of the U.S. market, and 80% of the E.U. market as of October.” And, he says, even if Comirnaty’s sales fall off in 2022 (which, as Budwell points out, is unlikely due to the recent rise of the Omicron variant), he’s not concerned because he believes that Paxlovid can more than make up for the potentially lose slack.
Carchidi pointed out that “On Dec. 14, it confirmed the results of its recent phase 2/3 clinical trial, which showed that adult patients treated with Paxlovid within five days of symptom onset experienced an 88% reduction in their risk of hospitalization or death compared to placebo.” He says that Pfizer’s management has already shared this data with the European regulators in its attempt to get emergency authorization for Paxlovid in that region. Furthermore, he says, “And the U.S. government has already agreed to buy 10 million courses of the drug for $5.3 billion, to be delivered next year.”
Carchidi calls Pfizer a leading COVID-19 stock heading into 2022 and concluded his article saying, “So even if Comirnaty revenue scales down in 2022, Paxlovid income could just be getting started, and that's just one more reason that Pfizer is the leading COVID-19 treatment stock.”
Kinjel Shah, another Nobias 5-star rated analyst, recently published a bullish article on Pfizer, which highlighted much of the same data that we’ve already discussed with regard to both Comirnaty and Paxlovid. But Shah also discussed other pipeline successes, including, “Pfizer’s Prevnar-20, a 20-valent pneumococcal conjugate vaccine, was approved in the United States this year” as well as Pfizer’s recent M&A activity as bullish signs. Shah said, “Pfizer announced a definitive agreement to acquire Arena Pharmaceuticals for $100 per share or $6.7 billion in an all-cash deal.”
Shah continued, “The deal will add Arena’s lead candidate, etrasimod, a next-generation and selective sphingosine-1-phosphate (S1P) receptor modulator, to Pfizer’s inflammation and immunology pipeline. Arena’s pipeline also includes pipeline candidates like temanogrel and APD41, which are in mid-stage development for cardiovascular diseases.”
Shah also notes that “strong growth of key brands like Ibrance, Inlyta and Eliquis” should continue to push its sales and earnings higher in 2022. Shah points out that “Estimates for Pfizer’s 2022 earnings have gone up from $3.61 to $5.33 over the past 60 days” and therefore, the stock’s big rally over the last several months appears to be justified by its underlying fundamentals. It was difficult to find a bearish report on Pfizer from a highly rated analyst.
Budwell posted an article at The Motley Fool on December 6th which highlighted one of Pfizer’s recent dips saying, “On Sunday, the White House's chief medical advisor, Dr. Anthony Fauci, said that the preliminary data regarding the severity of the omicron variant was "encouraging." While this version of the novel coronavirus appears to be more transmissible than delta, the first batch of data seem to indicate that omicron might be less virulent.
Dr. Fauci did warn, however, that more data are required to draw any firm conclusions about the pathogenicity of this variant.” He continued, “If omicron is indeed less deadly than its predecessors yet spreads more easily, this variant might turn out to be great news from a public health standpoint. The bad news for vaccine makers like Pfizer, Ocugen, and Vaxart, though, is that a milder form of the novel coronavirus may significantly undercut demand for jabs.” However, overall, Budwell’s more recent opinions make it clear that he remains bullish on PFE shares.
Nicholas Ward is a Senior Investment Analyst at Wide Moat Research. He has spent the last 8 years writing about the stock market at various publications, including Seeking Alpha, The Street, Forbes Real Estate Investor, Sure Dividend, The Dividend Kings, iREIT, Safe High Yield, and The Intelligent Dividend Investor.
And he’s not alone. 88% of the credible authors that we track with the Nobias algorithm currently offer a “Bullish” opinion on PFE shares. With all of this bullish sentiment in mind, it’s interesting to look at the recent reports published by 4 and 5-star rated Wall Street analysts that we track and see the average price target applied to PFE shares is $45.50. Today, PFE trades for $58.71. Therefore, the average price target here represents downside potential of approximately 22.5%.
As Shah said, Pfizer’s earnings estimates for 2022 have increased by nearly 48% during the last 60 days however, so this lower average price target could be the product of Wall Street analysts waiting for Pfizer to report its fourth quarter earnings before updating their opinions.
Pfizer is a unique situation where the credible authors are much more bullish on the stock than the credible analysts that we track. Time will tell who is correct, but one thing is certain: Pfizer is an industry leader right now, having posted year-to-date returns that put it in the upper echelon of all S&P 500 stocks.
Long-term shareholders here have to be thrilled with the nearly 60% year-to-date returns that PFE has generated and reading through the recent reports published by credible authors, it’s clear that the majority of them expect for this positive momentum to continue into next year as well.
Disclosure: Of the stocks mentioned in this article, Nicholas Ward is long PFE. Nicholas Ward wrote this article for Nobias at their request with a view of giving investors a balanced perspective based on the writings of Nobias highly rated analysts and bloggers. Nobias has no business relationship with any company whose stock is mentioned in this article and does not have a position in this stock.
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Disclaimer: The Nobias star rating is based on past performance results and is not an indicator of future results. These past performance returns do not represent returns that any investor actually earned. Assumptions made include the ability to purchase the stocks recommended by the author under liquid markets where the transaction would be at the market price for the day. In reality, loss in liquidity may have a material impact on the returns that actually may have been earned. Further, returns are calculated without any including transaction costs, management fees, performance fees or expenses, or reinvestment of dividends and other income. This information is provided for illustrative purposes only.