Pfizer stock (NYSE: PFE) lost about 5% in 2024, underperforming the broader S&P 500 index, which gained 23% for the year. Despite strong performances from other pharmaceutical giants like Eli Lilly stock (up 31%) and AbbVie stock (up 15%), Pfizer’s stock performance has been muted. This is attributed to a combination of factors including the impact of a decline in annual Covid-19 vaccine sales, falling profitability, and increased competition for some of its drugs, among others. Also see Buy, Sell, Or Hold LLY Stock At $750?
In this note, while we briefly touch upon Pfizer’s performance in 2024, we focus on the impact on PFE stock and how 2025 could turn out. But, if you want upside with a smoother ride than an individual stock, consider the High-Quality portfolio, which has outperformed the S&P, and clocked >91% returns since inception.
How Did 2024 Turn Out For Pfizer?
Some of the trends were clearly visible for PFE in 2024. Firstly, it saw the downward sales trend being halted in Q2. Pfizer’s sales excluding Covid-19 products have grown in double-digits over the last couple of quarters. Secondly, the company is seeing a strong uptick in Vyndaqel and Abrysvo. Also, a continued growth in Eliquis has aided the overall sales growth lately. Vyndaqel sales were up 66% y-o-y to $3.9 billion for the nine-month period ending Sep 2024, while Eliquis sales were up 8% to $5.5 billion. The company’s total revenue of $59.4 billion in the last twelve months is slightly above the $58.5 billion in 2023. Pfizer acquired Seagen in December 2023, and it has contributed to the top-line growth lately. Lastly, to improve its profitability, Pfizer has been focused on cutting costs and aims to achieve $4 billion in savings for 2024. Pfizer saw its total debt decline to $67 billion now, versus $71 billion in 2023. However, its cash declined from $13 billion to $10 billion over this period. Pfizer recently announced that it has sold 700 million shares of Haleon for $3.05 billion. Haleon was formed in 2019 by merging the Pfizer’s and GSK’s consumer healthcare business. After the recent sale, Pfizer’s stake in Haleon will be reduced to 7.3%. [1]
This will boost Pfizer’s cash balance.
How Did This Impact PFE Stock?
PFE stock declined from $28 at the beginning of 2024 to around $27 toward the end of the year. Looking at a slightly longer term, the performance of PFE stock with respect to the index over the last four-year period has been quite volatile. Returns for the stock were 67% in 2021, -10% in 2022, -41% in 2023, and -2% in 2024. The Trefis High Quality Portfolio, with a collection of 30 stocks, is considerably less volatile. And it has comfortably outperformed the S&P 500 over the last four-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.
Given the current uncertain macroeconomic environment around rate cuts and changes in the White House, could PFE face a similar situation as it did in 2023 and 2024 and underperform the S&P over the next 12 months — or will it see a recovery? We think PFE stock is now undervalued. We estimate Pfizer’s valuation to be around $36 per share, reflecting around 40% upside from its current levels. The optimism stems from its attractive valuation. At its current levels of around $26, PFE stock trades at 2.5x trailing revenues, which is much lower than the stock’s average P/S ratio of 3.1x over the last five years. Furthermore, the company’s initiatives to boost profitability should result in better earnings growth going forward.
What’s In Store For PFE In 2025?
We think 2025 may turn out to be better for Pfizer, with a slight improvement in sales and earnings. However, Pfizer’s blockbuster arthritis drug Xeljanz (tofacitinib) is set to lose patent protection in 2025 in the U.S. Xeljanz is a blockbuster drug for Pfizer, with annual sales exceeding $1 billion. We expect Vyndaqel, Abrysvo, and Eliquis to continue to gain market share, bolstering the top-line growth, while Xtandi and Prevnar may see increased competition. It will be interesting to see how the company’s recently approved Covid-19 vaccine trends in 2025. The updated 2024-25 formula for Comirnaty, which is effective against newer variants of the virus, was approved by the U.S. FDA in August last year.
Overall, PFE stock looks like it will have a mix of positives and negatives to deal with in 2025. We think that investors will be looking for any signs of an improvement in profitability. With its stock trading at under 2.5x trailing revenues, we think the potential headwinds are largely priced in.
While PFE stock looks undervalued, it is helpful to see how Pfizer’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.
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