Wall Street Analyst Predicts Pfizer Shares Could Reach $36, Raising Question of Purchase Opportunity at Current $26 Price Point.
Pfizer's shares (PFE 0.30%) witnessed an upward trend lately due to an increased dividend payout and optimistic future projections. Management maintained their annual revenue and earnings projections from October and presented their plans for the forthcoming year.
Following Pfizer's updated forecast, BMO Capital analyst Evan Seigerman reaffirmed an outperform rating and set a $36 per-share price target. Should Pfizer reach Seigerman's target, investors purchasing at current prices could experience a potential 37% growth in their investments within a year.
It's essential for individual investors to remember that investment bank analysts don't bear any personal financial repercussions from issuing a wrong prediction, apart from potentially damaging their professional reputation. Below, I'll discuss some reasons why Pfizer is facing challenges and argue for purchasing Pfizer as a reliable pharmaceutical company.
Factors leading to Pfizer's decline
Pfizer's stock has faltered by approximately 57% since reaching its 2021 peak. The cause for this decline is primarily the uncertainty in sales predictions for their COVID-19 vaccine, Comirnaty, and antiviral therapy, Paxlovid.
This year, combined sales for the company's COVID-19 products are projected to reach $10.5 billion. However, this figure is an enormous dip from the $56.7 billion in sales these two drugs generated in 2022.
In 2022, Pfizer invested $5.4 billion in Global Blood Therapeutics and their sickle cell disease drug, Oxbryta. In September, a safety concern prompted the company to withdraw Oxbryta from the market.
Pfizer's partnership with Bristol-Myers Squibb markets the next-generation blood thinner, Eliquis. With sales of $5.5 billion during the first nine months of 2024, Eliquis is Pfizer's most significant revenue source. Sadly, the U.S. patent protecting its market exclusivity expires in 2026.
Reasons to buy Pfizer now
Despite the fall in Pfizer's share price, the company continues to increase its dividend payout. Most recently, they raised their quarterly dividend for the 16th consecutive year. At its current devalued price, the steadily rising dividend offers a 6.5% return.
The loss of Oxbryta will create a substantial impact, but it won't hinder Pfizer from boosting its dividend payout. In 2025, management anticipates adjusted earnings to settle between $2.80 and $3.00 per share. This figure easily surpasses their current annual dividend obligation of $1.72.
The primary patent protecting Eliquis' exclusivity expires in 2026, but a formulation patent is expected to allow for generic drug manufacturers to launch a competitor only by April 2028 at the earliest. In the interim, new blockbuster drugs should generate sufficient sales to offset the upcoming loss and ensure numerous annual dividend increases.
In 2023, the U.S. Food and Drug Administration (FDA) authorized nine new drugs from Pfizer. Although not all of them will be successful, new revenue sources have already aided managers in predicting steady income growth in 2025 and beyond. At the midpoint of management's income estimates, total revenue is expected to surge by 5% in 2025.
One of Pfizer's newly-acquired revenue streams, Padcev, secured FDA approval to treat newly-diagnosed bladder cancer patients in 2023. Since then, it has become the standard care for this patient population, boosting sales by 138% year-over-year to $1.1 billion during the first nine months of 2024.
In addition to a myriad of new products like Padcev elevating revenue, Pfizer is actively scaling back its operations. In 2024, the company diminished annual operating expenses by $4 billion and aims to reduce an additional $500 million the following year.
Time to invest?
Reduced expenses paired with increasing sales offer a remarkable opportunity for new investors to surpass market growth over the long term. Therefore, you may anticipate Pfizer's stock to trade at a premium valuation; however, this is not the case.
At present prices, Pfizer shares can be acquired for just 9.1 times the midpoint of management's adjusted earnings estimate for 2025. Although upcoming patent expirations will sting, they probably won't halt total sales, earnings, and dividend payments from increasing in the subsequent decade. Adding shares to a diversified portfolio to hold over the long term appears to be a shrewd decision for most investors.
In the investment world, analyzing potential opportunities often involves considering factors such as a company's financial performance and dividend prospects. Given Pfizer's ongoing dividend increases and a potential 37% growth for investors purchasing at current prices, as predicted by BMO Capital analyst Evan Seigerman, investing in Pfizer might be an appealing choice for those looking to boost their finance portfolio through investing.
Furthermore, Pfizer's consistent dividend payouts, even with the withdrawal of Oxbryta, demonstrate its financial stability and ability to generate profit. With new blockbuster drugs expected to mitigate the loss of Eliquis' market exclusivity in 2026 and numerous revenue sources anticipated to drive income growth, investing in Pfizer could potentially provide lucrative returns in the long term.
