Why Is Pfizer Stock So Low?

Shares in the American pharmaceutical corporation Pfizer (PFE) are currently trading 17% down from their all-time August closing highs of $50.42.

A perfect storm has battered the New York-based drug maker’s fortunes of late, with rising concerns surrounding President Joe Biden’s Medicare cost cutting plans, uncertainty over the need for Pfizer’s Covid-19 booster vaccine, and the newly emerging threat from rival biopharma outfit Merck all combining to put pressure on a company that was hitherto a ringing success throughout the coronavirus pandemic.

However, Pfizer’s prospects may be about to change. The firm’s Comirnaty Covid shot was just granted authorization by the FDA for use as a booster jab for adults of all ages, having already been cleared for the same purpose by EU regulators.

This development wasn’t simply a rubber stamping exercise either; Moderna’s jab failed to get blanket approval when its own bid for booster shot recognition was hampered when another study found it posed a greater risk of triggering myocarditis in men under 30 – resulting in it being limited to those who have “severely weakened immune systems”, while being banned for use in males born in or after 1991.

Furthermore, the CDC’s Advisory Committee on Immunization Practices will meet early November to adjudicate on the suitability of Pfizer/BioNTech’s jab for use in children aged between 5 and 11 years old.

As it stands, Pfizer is pulling away from Moderna (MRNA) in the vaccine booster shot race at a rapid clip. So, does this mean the company’s stock is about to make a reversal – or are the bad times here to stay a little while longer?

Pfizer Vs Moderna: A Tale of Two Vaccine Manufacturers

One of the key stories of the Covid era has been the rivalry between competing vaccine manufacturers Pfizer and Moderna.

On paper, the two companies couldn’t be more different: Pfizer is a pharmaceutical stalwart with an history going back over 170 years, while Moderna is barely a decade old and, until less than twelve months ago, had never brought a single drug to market before.

But that all changed for Moderna at the outbreak of the global coronavirus pandemic, as the crisis finally gave the firm an opportunity to demonstrate its deep technological value and become one of the first drug producers to roll-out a safe and viable Covid vaccine.

Pfizer, on the other hand, wasn’t out to prove anything. The firm’s credentials were previously unimpeachable, and this was only further confirmed when its partnership with German company BioNTech SE culminated in the world’s first authorized vaccine for use to the battle against Covid-19.

Pfizer Pipeline Is Highly Diversified

So is Pfizer just a Covid-19 play at this point in time?

No, not at all.

In fact, the company’s pipeline boasts over 20 drugs in late-stage testing, with a number of these being potential blockbusters. Take PFE’s next-generation pneumococcal conjugate vaccine PREVNAR 20, a Phase 3 drug designed to prevent pneumonia caused by Streptococcus pneumoniae.

The latest results announced by Pfizer suggest that the compound was safe and conferred immunogenicity when administered alongside various alternative seasonal influenza vaccines.

In addition to its development pipeline, Pfizer also has a raft of other successful drugs already on the market and generating revenue for the business.

Cancer medicines Xtandi and Inlyta are used in the treatment of prostate cancer and renal cell carcinoma respectively, and brought in $560 million of sales between them, while Vyndamax, a drug for rare heart disease, made $501 million, posting an operational increase of 77% over the second quarter 2021.

That said, it was Eliquis, the blood thinning drug, that really shone among the non-Covid offerings, making $1.48 billion, just slightly edging out Pfizer’s second highest grossing drug Ibrance at $1.40 billion.

All in all, however, PFE’s revenues from its Covid-19 vaccine dwarfed everything else, with sales over $7.83 billion – helping to grow total revenue streams 86% for the period.

Pfizer Dividend Is Well Covered

If investors are left cold by Pfizer’s lack of positive price action lately, they’ll certainly feel compensated by the company’s attractive dividend profile. Having paid out a consecutive dividend now since 1980, its current yield stands at 3.73% with an annual total dividend of $1.56.

The dividend is well covered too; Pfizer’s dividend coverage ratio is high at 2.7x, while its free cash flow payout ratio is admirably low at 40.6%.

PFE has increased its dividend payout for twelve years in a row now, and that looks likely to continue. And even though PFE’s dividend yield puts it in the top quarter of all dividend paying companies on the market, its price run-up from March through August 2021 actually devalued it slightly.

Some opportunistic income investors might see Pfizer’s present price woes as a good opportunity to load up on this reliable dividend paying stock.

Is Pfizer Undervalued?

Pfizer comes across as a very cheap stock on pretty much every financial metric you could think of.

Its forward non-GAAP P/E ratio of 10.18 vastly outperforms its Health Care sector rivals at 21.69, and its Price-to-Sales multiple of 2.86 trades at almost a third of the competition.

The company’s year-on-year revenue growth of 60% is also commendable, as is its operating cash flow appreciation of 57%.

Its gross profit margins – always a crucial sign of the health of a business – are enormous at 71% too.

But outside of the raw numbers, Pfizer is also investing to ensure its future remains bright. The company has a capital allocation framework that favors R&D investments into its five core therapeutic areas, and the seeking of strategic partnerships that help deliver scientific breakthroughs at every stage of development.

PFE is also undertaking a share repurchase scheme to deliver to value to stakeholders in addition to its dividend commitments, and has already repurchased 2.6 billion shares between 2010 and 2020, with a remaining authorization to repurchase another $5.3 billion of stock.

So yes, Pfizer is cheap at the moment – but there are a few risks attached.

Much of its recent revenue growth has come via its Covid franchise, and if it were to lose this primary growth driver the repercussions could be harmful for the company.

There’s also the uncertainty regarding the ongoing booster program – which has yet to be decisively resolved – and vaccine hesitancy and regulatory hazards both play into the equation too.