One stock that just can’t seem to break through lately is Pfizer (NYSE:PFE). While it posted some decent earnings numbers, investors can’t shake fears that the company faces huge headwinds that could push its $145 billion valuation down in the coming months and years. And while markets have done well overall, Pfizer shares are down about 11% this year.
Is the healthcare stock in big trouble and headed for a bigger decline, or are investors perhaps a little too bearish on the sector right now?
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Given how well Pfizer has performed in recent years on the back of its COVID-19 vaccine and pill (sales exceeded $100 billion in 2022), it is still seen by many investors as a stock whose best days may be behind be back. Demand for the COVID vaccine is declining significantly, and some investors may be concerned about a possible change in vaccine policy under the incoming Trump administration.
There’s no denying that the recent election results appear to be weighing on investors, as Pfizer stock has since hit a new low. Today, the stock trades at a deeply discounted price-to-earnings ratio (based on analyst estimates) of less than 9, which suggests investors are somewhat concerned about Pfizer’s future.
Through the first nine months of the year, Pfizer generated sales of $45.9 billion, an overall increase of 2%. While that seems modest, it’s not a bad growth rate when you factor in a sharp decline in COVID vaccine sales. Comirnaty, the company’s COVID vaccine, has generated sales of less than $2 billion, down 66% year-over-year.
Stronger results in the specialty care and oncology segments have helped Pfizer overcome headwinds on the vaccine side of its business.
There could be bigger declines in vaccine and COVID sales for Pfizer in the future, regardless of government policy. And that’s because attitudes have changed in recent years: Some people have become more skeptical about vaccines, and unless COVID becomes a major health issue again, sales could continue to decline. But given the stock’s low valuation, I think these risks are already priced into the share price.
If you’re investing in Pfizer at this stage, it’s because you’re optimistic about the growth opportunities beyond vaccine-related revenues. The big growth opportunities may be in oncology, especially with Pfizer investing $43 billion to acquire Seagen, which makes antibody-drug conjugates that are more targeted treatment options than chemotherapy. Pfizer has acquired several companies in recent years, and with a more diverse pipeline of drugs, these moves could offset the impact that looming patent cliffs and the drop in COVID sales will have on its business in the long term.
