Pharmaceutical giant Pfizer (NYSE:PFE) has lost some ground in recent days, dropping by a little less than 3 percent. Though not a large loss, this drop continued what has been a fairly discouraging trend for shareholders, as Pfizer has declined by more than 50 percent from the highs it set in late 2021 in the midst of the COVID-19 pandemic. Why is PFE moving lower, and could Pfizer’s depressed stock be a good long-term buy for investors who are willing to buy and hold through volatile times
Why Is Pfizer Stumbling Right Now?
Pfizer’s challenges in recent days were largely the result of a mixed earnings report for Q4 and the full year of 2025. For the year, revenues declined by 2 percent to $62.6 billion, with Q4 seeing a 3 percent slide to $17.6 billion. These revenue drops largely reflected slowing demand for drugs associated with COVID-19. Excluding the effect of these drugs, revenues rose by 6 percent.
GAAP net income also dropped by 3 percent in 2025, falling to $7.8 billion. Adjusted income, however, was 4 percent higher than in 2024, rising to $18.4 billion. Adjusted EPS came to $3.22, while GAAP EPS was $1.36. It’s also worth noting that Pfizer invested $10.4 billion in R&D for the year, a slight downgrade from the $10.8 billion in R&D spending it reported in 2024.
For 2026, management’s guidance calls for revenue in the range of $59.5 billion to $62.5 billion, signaling what could be another year of challenging revenue conditions. Adjusted EPS is also expected to retreat to the range of $2.80-$3.00. This lower guidance reflects several headwinds the business is facing, including the loss of exclusivity among some of its products that management expects to result in the loss of about $1.5 billion in revenue. Pfizer also expects a higher tax rate on its adjusted income in 2026.
Government policy also accounts for some of the less optimistic outlook ahead for Pfizer. In crafting its guidance for 2026, management assumed the impacts of current tariffs would remain steady, though these could change throughout the year. Another government program, TrumpRx, is expected to adversely affect revenues. This program’s impacts won’t be exclusive to Pfizer, as TrumpRx is a government prescription drug website where participating drug companies can sell their products directly to consumers at significantly discounted prices negotiated with the federal government.
Pfizer’s Pipeline
With Pfizer about to lose exclusivity on some of its products and its COVID-19 portfolio contributing less revenue, a great deal of Pfizer’s future performance will likely hinge on its pipeline. Of particular importance is the recent acquisition of Metsera for $10 billion, giving Pfizer rapid access to promising obesity drugs. Although the economics of obesity drugs are cooling somewhat as prices drop, a move into this promising new category of drugs could be a major long-term growth driver for Pfizer.
Pfizer has also bulked up its own internal pipeline, with several oncology and internal medicine drugs now in Phase 3 development. Behind these are a large number of drugs in earlier stages, creating the potential for Pfizer to keep introducing new medications as part of its portfolio for years to come.
Has Pfizer Become Undervalued?
At 15.4 times earnings and 2.4 times sales, Pfizer doesn’t look especially expensive. Indeed, its P/E ratio is significantly below the sector average of 23.4. The stock also isn’t priced at an outrageous premium to its cash flows, commanding a current price-to-operating-cash-flow ratio of 14.6.
Despite what would appear to be fairly attractive pricing ratios, most analysts don’t seem to see a great deal of near-term upside in PFE shares at the moment. The average analyst target price for Pfizer is $28.82, implying an upside of only 8.9 percent. Most analysts are also rating PFE as a hold. As such, it may be more accurate to say that PFE has arrived at a more or less fair value than that it has become substantially undervalued.
Pfizer’s High Dividend Yield
Another characteristic of Pfizer that some investors may find attractive is its extremely high dividend yield, currently standing at 6.5 percent. For reference, this is more than five times the S&P 500 average of 1.1 percent. As such, PFE appears to have significant potential as an immediate source of dividend income.
Although Pfizer offers an extremely high yield, it may not be able to raise its payout much in the near future. Pfizer’s dividend payout ratio is over 100 percent, and even its free cash flow payout ratio is well above 90 percent. While a dividend cut doesn’t appear to be immediately on the horizon, Pfizer’s distributions are likely to plateau until it can return to steady earnings growth. This has been illustrated quite recently, as management declined to increase the dividend for Q1, making it the fifth consecutive quarter with a $0.43 per share payout.
Even so, 16 years of prior dividend increases and 349 total quarters of issuing dividend payments in the company’s history suggest that management will keep prioritizing the use of cash flows to make quarterly distributions to shareholders. Pfizer also reiterated its commitment to long-term dividend growth in the full-year 2025 report, citing it as a core piece of management’s capital allocation strategy.
Is Pfizer a Stock to Buy and Hold Now?
Although Pfizer is facing its share of headwinds, the stock could be trading at an attractive enough price to make it worth a look for long-term investors and those seeking dividend income. Between a large pipeline of its own and strategic acquisitions, Pfizer could start to gradually replace the revenue that is being lost as COVID-19 vaccines and medications slump.
It’s worth noting, however, that Pfizer’s recovery may not be an especially rapid one. 2026 could be another challenging year for the business, marked by further erosion of revenues. PFE’s high dividend will likely provide some cushioning from these difficulties for shareholders, but it could still take some time for Pfizer to regain the ground it has lost.
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.