If you’re in the market for potential investments, you may be considering Pfizer (NYSE: PFE) stock as a viable option. The pharmaceutical giant offers a generous dividend yield of 5.92% and its shares trade at an attractive multiple of under 13 times forward earnings. Additionally, Pfizer’s robust clinical pipeline boasts an impressive 83 programs in development, making it an appealing choice for investors. Furthermore, the recent acquisition of Seagen has positioned Pfizer as a top-tier manufacturer in the growing field of antibody-drug conjugates.
Despite these positive aspects, Pfizer faced commercial challenges in the past year. Its sales of COVID-19 products fell short of investor expectations, and some new product launches, including the respiratory syncytial virus vaccine, Abrysvo, failed to meet internal sales targets. However, amidst these setbacks, there are still compelling reasons to consider investing in Pfizer.
One compelling reason to consider buying Pfizer stock lies in its shareholder-friendly capital allocation strategy. The company has consistently increased its dividend for over a decade and regularly engages in share repurchases to enhance earnings per share. In fact, Pfizer has reduced its outstanding share count by an impressive 26% over the past 20 years. This commitment to rewarding shareholders has historically helped Pfizer outperform the broader market during certain multiyear periods, although its recent performance has been lackluster.
Another factor favoring Pfizer’s investment potential is its aggressive approach to mergers and acquisitions, coupled with its robust clinical pipeline. The company is actively pursuing novel therapies for obesity, a prevalent global health issue. In addition, Pfizer is expected to disclose top-line results from its gene therapy program for Duchenne muscular dystrophy, a rare and fatal genetic disorder, later this year. These high-value product candidates have the potential to generate significant revenue for Pfizer in the future.
However, it is crucial to acknowledge the risks associated with Pfizer’s growth strategy. The company has invested billions of dollars in acquiring other biotechs, such as Arena Pharmaceuticals, Seagen, and Global Blood Therapeutics. While these deals offer potential benefits, there is uncertainty regarding their long-term profitability. Some of Pfizer’s recent additions to its portfolio face strong competition from therapies that may prove to be superior in terms of safety and efficacy. If this scenario unfolds, Pfizer may struggle to recoup its investments in these costly assets.
In summary, Pfizer is a reputable company with several positive attributes, yet it also faces unique risks due to the evolving nature of its portfolio. Investors seeking a stable dividend stock with a high yield and moderate growth potential could find Pfizer appealing in 2024. However, those looking for a stock capable of consistently outperforming the broader market may be inclined to explore other options. With Pfizer’s projected 2.7% revenue increase this year, it may not convince Wall Street to grant it a premium valuation.
Ultimately, the decision to invest in Pfizer should be made after careful consideration of the aforementioned factors and a thorough evaluation of one’s individual investment goals and risk tolerance. Conducting proper research and consulting with a financial advisor can provide valuable guidance in making informed investment decisions.
