One stock that lately can’t seem to catch a break is Pfizer (NYSE: PFE). Even though it posted some decent earnings numbers, investors can’t shake the fear that the company faces massive headwinds that could push its $145 billion valuation lower in the months and years to come. And while markets have done well overall, Pfizer shares are down about 11% this year.
Are healthcare stocks in big trouble and headed for further decline, or perhaps investors are too bearish on the business right now?
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Given Pfizer’s strong performance in recent years due to its COVID-19 vaccine and pill (its revenue surpassed $100 billion in 2022), for many investors, it is still considered a stock whose best days may be behind it. . Demand for its COVID vaccine is declining significantly and some investors may worry about a possible change in vaccine policy under the incoming Trump administration.
There’s no denying that the recent election results appear to be weighing on investors, as Pfizer shares have since hit a new low. Today, the stock trades at a heavily discounted forward price-earnings multiple (according to analyst estimates) of less than 9, suggesting investors are feeling a little concerned about Pfizer’s future.
Through the first nine months of the year, Pfizer has generated revenue of $45.9 billion, an overall increase of 2%. While that seems modest, it’s not a bad growth rate considering a sharp decline in COVID vaccine sales. Comirnaty, the company’s COVID vaccine, has generated sales of less than $2 billion, representing a 66% year-over-year decline.
Better results from its specialty care and oncology segments have helped Pfizer overcome headwinds on the vaccine side of its operations.
There could be further declines in COVID and vaccine sales ahead for Pfizer, regardless of government policy. And that’s because attitudes have changed in recent years, some people have become more skeptical about vaccines, and unless COVID becomes a major health issue again, sales could continue to decline. But given the stock’s depressed valuation, I think those risks have already been factored into its stock price.
At this stage, if you’re investing in Pfizer, it’s because you’re optimistic about its growth opportunities outside of vaccine-related revenue. The big growth opportunity may be in oncology, especially with Pfizer’s $43 billion investment to acquire Seagen, which makes antibody-drug conjugates that are more targeted treatment options than chemotherapy. Pfizer has been acquiring multiple businesses in recent years and, with a more diverse drug portfolio, those moves can offset the effects that looming patent cliffs and declining COVID sales will have on its operations in the long term.