What’s Next For Pfizer Stock?

Pfizer stock (NYSE: PFE) was up 5% on Tuesday, December 17, after the company announced an optimistic outlook for 2025. The company expects its revenue to be in the range of $61 billion to $64 billion, and its adjusted earnings to be in the range of $2.80 and $3.00 per share. This compares with our current forecast of $63 billion and $2.94, respectively. Pfizer’s management also stated that it does not expect any meaningful changes in vaccine policy next year, despite Robert F. Kennedy Jr – a vaccine skeptic – taking charge of HHS. While Pfizer stock shot up yesterday, AVGO stock has had a phenomenal week with over 30% gains. Look at our take on What’s Happening With AVGO Stock?

Pfizer stock has been weighed down lately, amid falling revenues and margins. The demand for the Covid-19 vaccine has taken a hit in recent years and the company has been looking to bridge the revenue gap. The company looked at inorganic growth and acquired Seagen, Global Blood Therapeutics, and Biohaven, among others in the last two years or so. Still, the stock has been on a decline, given the lack of investor optimism. If you want upside with a smoother ride than an individual stock, consider the High-Quality portfolio, which has outperformed the S&P, and clocked >91% returns since inception.

For Pfizer, Q2’24 was the turning point, in our view, as the fall in sales stalled and the company was looking forward to improvement in sales and margin. Pfizer’s sales excluding Covid-19 products have grown in double-digits over the last couple of quarters. Pfizer is seeing a strong uptick in Vyndaqel and Abrysvo and a continued growth in Eliquis has aided the overall sales growth lately. Vyndaqel sales were up 66% y-o-y to $3.9 billion for the nine-month period ending Sep 2024, while Eliquis sales were up 8% to $5.5 billion. The company’s total revenue of $59.4 billion in the last twelve months is slightly above the $58.5 billion in 2023.

Pfizer has been looking to cut costs considerably. It is targeting $4 billion in savings by the end of this year. This plan includes massive layoffs and cutting down on its research and development spending. Separately, the company intends to shift to biologics drugs for higher reliance on revenues. Biologics are more expensive and could drive up Pfizer’s pricing and margins.

Looking at PFE stock, the decline over the last few years has been far from consistent, with annual returns being considerably more volatile than the S&P 500. Returns for the stock were 67% in 2021, -10% in 2022, and -41% in 2023. In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, is considerably less volatile. And it has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.

Given the current uncertain macroeconomic environment around rate cuts and changes in the White House, could PFE face a similar situation as it did in 2023 and underperform the S&P over the next 12 months — or will it see a recovery? We maintain our view that PFE stock is undervalued despite its recent rise. At its current levels of $26, PFE stock trades at under 9x expected earnings of $2.94 per share in 2025, versus the stock’s average P/E ratio of 14x over the last five years. This is much lower than some of its peers. For perspective, MRK stock trades at 11x, and ABBV and JNJ stock at 14x forward expected earnings. We think this gap in valuation will narrow in favor of Pfizer in the coming years. We estimate Pfizer’s valuation to be around $36 per share, reflecting around 40% upside from its current levels.

While PFE stock looks undervalued, it is helpful to see how Pfizer’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.

[1] Returns as of 12/18/2024
[2] Cumulative total returns since the end of 2016

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