PFE with Nobias Technology: Case Study on Pfizer
Fundamentally speaking, Pfizer (PFE) has been one of the biggest beneficiaries of the COVID-19 pandemic. This company’s earnings-per-share increased by 99% in 2021, rising from $2.22/share in 2020 to $4.42 last year. What’s more, analysts expect to see the company continue to grow its bottom-line nicely this year as well, with the current consensus EPS growth rate estimate for Pfizer’s 2022 EPS coming in at 46%. These gains are largely on the back of the company’s leading position in the COVID-19 vaccine race. And, while PFE has received a nice fiscal windfall because of its success in combating COVID-19, the question remains, how long will the COVID-19 cash flows last?
Because of this major question market that is associated with the stock, PFE shares are currently trading for very cheap valuations. Even with its ~100% 2021 EPS growth and another ~50% or so growth expected this year, PFE is trading for just 10.06x its blended earnings-per-share. On a forward basis, shares are even cheaper. PFE is trading for just 8.25x 2022 EPS estimates.
Looking at the consensus EPS for 2023 and 2024, the reason for PFE’s cheap valuation becomes clear. Right now, analysts are calling for -20% EPS growth in 2023 and another -19% growth on top of that in 2024. In other words, Wall Street doesn’t believe that PFE can maintain its fundamental success levels that were largely propped up by COVID-19 vaccine sales. Yet, even with these fears in mind, when looking at the opinions expressed by the credible authors and analysts that the Nobias algorithm tracks, the sentiment surrounding this stock is clearly bullish.
PFE Jun 2022
Hamna Asim, a Nobias 4-star rated author, recently highlighted Pfizer’s popularity amongst retail investors in an article titled, “10 High-Yield Dividend Stocks Popular on Robinhood”. Asim wrote, “High yield dividend stocks act as sanctuaries for investors amid a turbulent stock market, since share price gains in a portfolio are unlikely in a macro backdrop plagued with inflation, possible recession, war, and rising rates. Investors tend to gravitate towards high yield stocks to get passive income and secure their investments, since these companies usually have strong fundamentals and stay on top of their performance to be able to keep up their dividend policy and maintain the trust of their stakeholders.”
And, specifically regarding PFE shares, Asim said, “Pfizer Inc. (NYSE:PFE) is an American multinational biopharmaceutical company that manufactures and markets medicines and vaccines in multiple therapeutic areas. Pfizer Inc. (NYSE:PFE)’s dividend yield on May 20 came in at 3.10%, and it is one of the 100 most popular stocks traded on Robinhood.”
Regarding PFE’s dividend, Asim stated, “Pfizer Inc. (NYSE:PFE) declared a $0.40 per share quarterly dividend on April 28, in line with previous. The dividend is payable on June 10, to shareholders of record as of May 13. Pfizer Inc. (NYSE:PFE) has a 12-year history of consistently increasing dividend payments.” Pfizer shares currently yield 2.99%.
Interestingly enough, it’s not just the retail investors on Robinhood who’ve been investing in PFE shares. Asim also stated, “In addition to Exxon Mobil Corporation (NYSE:XOM), Altria Group, Inc. (NYSE:MO), and Intel Corporation (NASDAQ:INTC), institutional investors are piling into Pfizer Inc. (NYSE:PFE).” In a recent Bloomberg report published by Nobias 4-star author, Riley Griffin, touched upon a major part of the bullish PFE thesis moving forward.
Griffin highlighted recent data showing that the PFE COVID-19 vaccine was “highly effective” in children under 5 and therefore, this unvaccinated population provides the company with a longer COVID-19 vaccine sales runway.
Griffin wrote, “Pfizer Inc. and BioNTech SE said their Covid vaccine was highly effective and prompted a strong immune response in children under age 5, based on early results from a trial that is likely to pave the way for infants and toddlers to finally get immunized.” Griffin continued, “A three-dose regimen was 80.3% effective in a preliminary finding based on 10 infections in children ages 6 months through 4 years old, the vaccine partners said in a statement on Monday.”
Griffin’s article concluded, “The US Food and Drug Administration is expected to convene advisory committee meetings in June to discuss the risks and benefits of both the Pfizer-BioNTech and Moderna vaccines in the youngest children, and provide a recommendation as to whether or not they should be cleared for emergency use.”
Showing the potential size of this opportunity for PFE, in a recently published article, Nobias 5-star rated author, Lauran Neergaard, stated, “The 18 million youngsters under 5 are the only group in the U.S. not yet eligible for COVID-19 vaccination.”
Neergaard continued, “Pfizer has had a bumpy time figuring out its approach. It aims to give tots an extra low dose — just one-tenth of the amount adults receive — but discovered during its trial that two shots didn’t seem quite strong enough for preschoolers. So researchers gave a third shot to more than 1,600 youngsters — from age 6 months to 4 years — during the winter surge of the omicron variant.” And, she said, “In a press release, Pfizer and its partner BioNTech said the extra shot did the trick, revving up the children's levels of virus-fighting antibodies enough to meet FDA criteria for emergency use of the vaccine with no safety problems.”
More recently, news broke that the White House has aggressive plans to vaccinate children against the COVID-19 virus as fears of a resurgence of infections during the upcoming winter months grows.
Jonathan Block, a Nobias 4-star rated author, recently published an article at Seeking Alpha which stated, “The White House on Wednesday unveiled its plans to vaccinate millions of children under the age of 5 with the COVID-19 shot.” Block continued, “Last week, the Biden administration made 5 million doses available to states and health care providers to order. Another 5 million was made available to order this week.”
Block concluded, “The U.S. FDA has yet to authorize COVID vaccinations in the below 5 age group but is expected to do so soon. On June 2, White House Coronavirus Response Coordinator Ashish Jha said the shots could begin as soon as June 21.”
Furthermore, PFE’s successful development of an anti-viral drug that fights existing COVID-19 infections successfully is yet another potential bullish catalyst for this company. Nathan Reiff, a Nobias 4-star rated author, recently published an article which touched upon the ongoing investments that PFE is making into its anti-viral production facility because of the potential long-term growth runway that its drug, Paxlovid, could have. Reiff said, “Pharmaceutical giant Pfizer Inc. (PFE) announced on June 6 that it planned to significantly increase its investment in U.S. manufacturing in support of Paxlovid, its COVID-19 oral treatment. The company will make a $120 million investment in its Kalamazoo, Mich. manufacturing facility to increase production of pharmaceutical ingredients for the drug.1 The U.S. Food and Drug Administration (FDA) issued an emergency use authorization for Paxlovid in certain cases last December.”
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.
Reiff continued, “Pfizer aims to produce 120 million courses of Paxlovid in 2022.3 As of Pfizer's announcement, the company says it has shipped 12 million courses of the antiviral treatment to 37 countries, including five million to the U.S.” It is unclear, as of this point in time, what impact Paxlovid will have on PFE’s top and bottom-line moving forward, but this drug is yet another potential blockbuster that PFE has in its portfolio, assuming that the COVID-19 virus is here to stay.
PFE shares are down 2.71% during the last week; however, on a year-to-date basis, they have outperformed the market by a fairly wide margin. PFE shares are down 8.6% during 2022 thus far. The S&P 500 is down 16.24% during this same period. And, looking at the opinions expressed by the credible individuals that Nobias tracks, it appears as if this relative outperformance may continue.
90% of recent articles published by credible authors have included a “Bullish” bias. Right now, the average price target being applied to PFE shares by the credible Wall Street analysts that our algorithm tracks is $55.67. Today, PFE shares trade for $51.78/share. Therefore, this average price target implies upside potential of 7.5%. Overall, with PFE’s 2.99% dividend yield factored in, analysts are calling for double digit total return upside.
Disclosure: 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.
Additional disclosure: All content is published and provided as an information source for investors capable of making their own investment decisions. None of the information offered should be construed to be advice or a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. The information offered is impersonal and not tailored to the investment needs of any specific person.
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.