Pfizer (PFE) looks like it could be in favor with many analysts as it looks like most are neutral to buy on the stock. With all the new drugs in the pipeline and the strategic acquisitions, the company looks to be set well for 2013. But short-term may be another story.
Analysts at Citigroup initiated coverage on shares of Pfizer with a "buy" rating. Pfizer's shares closed at $24.85 Friday. Pfizer's trailing-twelve-month operating margin is 31.27%.
MKM Partners trims Pfizer from Buy to Neutral, moving its price target from $29 down to $25.
Analysts at Jefferies Group reiterated a buy rating on shares of Pfizer in a research note to investors on Monday, November 12th. They now have a $27.00 price target on the stock.
Analysts at Zacks reiterated a neutral rating on shares of Pfizer in a research note to investors on Friday, November 2nd. They now have a $26.00 price target on the stock.
Analysts at BMO Capital Markets reiterated an outperform rating on shares of Pfizer in a research note to investors on Friday, November 2nd. They now have a $29.00 price target on the stock.
Acquiring Nextwave Pharma
Nextwave Pharma was a privately-owned company focused on the development and commercialization of products for the treatment of attention deficit hyperactivity disorder (ADHD). The acquisition will give Pfizer exclusive rights to market Quillivant XR™ (methylphenidate hydrochloride) in North America. This is the first once daily liquid medication for the treatment of ADHD approved for distribution by the U.S. Food and Drug Administration. January 2013 is the expected launch date.
So what will this acquisition do for Pfizer? The new medication is a welcome addition to traditional medication regimens as authorities say that in 2011, there were more than 52 million prescriptions filled for ADHD medications, representing a 10% increase over 2010. Many young patients have a problem swallowing the larger pills and capsules. This once a day liquid will go a long way to alleviating this problem for many patients. So there is a huge market out there
Ken Fisher says invest in Pfizer long-term:
It has near endless top-notch brand names, and a stream of new products will capture growth from an aging developed-world demographic plus new emerging middle classes overseas- all wrapped in a classically cheap stock.
Pfizer currently has 87 drugs in its pipeline. While it's true that most are in the early stages, 11 are ready to be reviewed by the FDA. That number puts it ahead of most of its rivals, with Eli Lilly (LLY), a close second, having 63 drugs in Phases 1-3, plus one currently being reviewed. This in itself is not an advantage as quality always trumps quantity. It does have a couple drugs coming in phase I & II trials for type II diabetes, but the competition here is fierce. Tofacitinib, given the brand name Xeljanz, is still the drug of hope (I wrote about this in a past article) as the treatment with the potential to earn $1 billion or more in sales. It was recently approved by the FDA in early November.
Long-Term Investing in Pfizer
I think Pfizer will have a good 2013 and with all the different drugs in the pipeline, there is a good chance that a few of them might make a gold mine for the company. It is not an expensive stock right now and could see a pullback soon before it continues to move up in 2013.
From its peak at $25.65, It's no surprise that the stock pulled back because the RSI has twice signaled overbought tendencies. Since it moved back, it found a bottom at a strong support level and has since moved up barely peaking over the $25 level, creating what could be defined as a double top. Will the stock continue up or will it start to move back down now? Since it has pushed through the Bollinger Bands at the top, I would not be surprised if we saw a pullback here soon. When I look at the MACD, it looks like the stock is still moving up because the MA's are running parallel. It does not look like the stock is ready to stop moving just yet. So where is the stock going? I'm not sure, but if this is a typical double top, we could see a pullback.
The Options Play
Presently trading at $25.56, I believe the stock will retract now that it has reached another plateau. For this reason, I am looking at a Bull Put Spread.
Buy the March 2013 put with a strike of '26' (priced at $1.21)
Sell the March 2013 put with a strike of '25' (priced at $0.69)
Net Debit to Start: $0.52
Maximum Profit: $0.48
Maximum Risk: net debit
Maximum Length of Play: 4 months
Reasoning behind the Trade
Double top warrants a pullback before it continues up.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.