Abbott Labs Vs Pfizer Stock: Which Is Best?

Pfizer Inc. (NYSE:PFE) and Abbott Laboratories (NYSE:ABT) are major players in the coronavirus vaccine race. Pfizer is partnered with BioNTech on a vaccine candidate that proved over 90-percent efficacy in clinical trials. Abbott Laboratories supplies a large portion of the covid-19 tests being used around the world to determine if you’re infected.

But which is the better buy between Abbott Labs vs Pfizer stock?

Pfizer already proved the importance of a vaccine when it announced its results and pulled the entire stock market up in response. Once it receives full approval from the Food and Drug Administration, stock prices could continue rising, and sales could continue for several years.

Meanwhile, the FDA already approved Abbot’s tests, and it’s expanding its capabilities to determine who was infected in the past. This helped fuel revenue and market interest in both companies. Let’s turn our attention to see what they’re up to for the next year, so investors know how to prepare.

Abbott Labs Stock Fair Value Is…

Abbott Labs shipped over 26 million antibody tests in 2020. This gave it global sales of $8.9 billion for the third quarter, a nearly 10-percent increase from the same quarter in the prior year.

Much of this ($2.6 billion) was generated from its diagnostics and testing segment, and it caused the company’s executives to forecast $2.35 per share diluted earnings for the year.

Of course, medical tests aren’t the only thing the company provides. It is the creator of Pedialyte, Similac, Ensure, i-STAT, and more. It also creates a variety of pharmaceuticals and medical devices.

The company’s market cap is approaching a record high $200 billion by the end of 2020, with a P/E ratio of 59.40. This is up from its 52-week low of $61.61 at the onset of the coronavirus outbreak and represents a nearly 30-percent increase from the prior year.

While the coronavirus tests experienced a surge, it’s unclear if the demand will last over the next few years. Sooner or later, viral testing may become par for the course. This has some bearish analysts wondering if the company may be overpriced.

A discounted cash flow analysis of Abbott Labs reveals fair value of $108. ABT share prices above that level signify a company that is overvalued.

Pfizer No Longer In The Dow But…

Pfizer is one of the largest pharmaceutical companies in the world and a component of the S&P 500 and S&P 100, along with the Fortune 500. However, it was removed from the Dow Jones Industrial Average on August 31, 2000.

Although the company rebounded from the coronavirus crash low of $27.88 per share, it had a turbulent year that underperformed the general market. In fact, it wasn’t until it announced positive results on its coronavirus vaccine candidate that it started to really pick itself (and the market) back up.

The stock is trading around $40 and should be considered a strong Buy at anything under that. It’s unlikely to receive approval from the FDA until the end of the year or even 2021.

However, once it does, the company has the massive manufacturing and distribution network to distribute doses quickly. Keep in mind most of those are already prepaid for by governments.

Pfizer should have a banner year in 2021. Not only does it have a coronavirus treatment, but its product line, including Zoloft, Lipitor, and Diffucan are going to continue being necessary well into the next two years.

Retail, tourism, and hospitality industries are depending on people getting healthy and back to “normal.”

Risks Of Buying Abbott Labs Stock

Abbott Labs received a boost in its diagnostics testing that may not be permanent. Flu tests are seasonal, and it’s possible SARS-CoV2 will come in waves and test demand will go down by 2022.

This means the company needs to continue spending on R&D in areas that may be suffering right now because of the Covid-19 buzz.

Still, these risks are relatively mild, and bullish analysts believe it’ll continue growing its market capitalization throughout the next two years.

The growth opportunity is much smaller for those jumping on right now, as it already experienced the bulk of its coronavirus boost. It could level off and underperform the general market as the economy recovers.

Dangers Of Investing in Pfizer

Pfizer’s stock will be tied to the coronavirus vaccine for at least the next six months, assuming it works.

We already saw what happened to stocks for biotech companies like Moderna (MRNA), Novavax (NVAX) and others when positive and negative results are announced. One of those other two stocks could easily outperform Pfizer.

Because it’s so large, even a coronavirus boost is a relatively smaller revenue boost than it would be to a cheaper stock. Although Moderna’s share price is more expensive than Pfizer’s, it has more growth potential, with a market cap at $35 billion vs $220 billion.

The merger and spinoff of Pfizer’s Upjohn unit could also stunt its short-term growth. However, that coronavirus vaccine is the hot topic of the holiday season, and that release should be more than enough to hold it up until the new year.

Pfizer Vs Abbott Labs Stock: The Bottom Line

Pfizer and Abbott Labs are critical companies in the coronavirus cure. One has the most promising vaccine candidate to date, while the other was first out the gate with detection tests. Between them, 2020 should end with positive news about a vaccine combatting the threat of the pandemic.

Each company already received a big market boost through the year, and growth potential is limited. However, the coronavirus doesn’t use calendars, and we already know it’ll continue spreading through any season. While this viral outbreak was terrible for mankind, it may boost both of these companies for at least two years to come.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.