Pfizer: Ride or Let Slide?

By Charles Delvalle

GlaxoSmithKline (GSK) added to Pfizer’s (PFE) woes Friday with a new assault on the anti-smoking pill market, previously dominated by Pfizer’s Chantix. Chantix has been losing ground since January, when US regulators warned about suicide risks connected with the drug.

I typically don’t cover pharmaceutical stocks because, in all honesty, the sector bores me a little. Something about hormones and cells just puts me to sleep. But I couldn’t pass up the one Frank Y. wanted me to cover…

I liked your comments on GE (GE).

Is Pfizer in the same position, is it a falling knife, or has it bottomed?

Pfizer – the maker of the ever-popular little blue pill. Describing them as a falling knife, though, is extremely appropriate. When you look at their chart, you should stretch it out as far as possible. That’s because this company is trading lower than any point in the last ten years.

But why?

Earnings dropped 17% last quarter and revenue dropped 5%. Why? They lost market exclusivity for Zoloft and Norvasc. This loss comes after they reduced their workforce by 10,000 people.

But the company is trying to right the ship. Revenues dropped only slightly, they’re buying back stock (last year they bought $10 billion) and they increased their dividend.

With all that said, I think Pfizer is a strong company, has a few promising drugs in phase 3 studies and should do well in the future. Unfortunately, the uncertainty all of these changes bring is forcing their share price lower.

Right now, the best thing to do is let Pfizer (PFE) slide for a while. In the next year, they could be an amazing buy.

Disclosure: none

Comments

[BlueOkie]

The dividend is 7.4% yield. Where else would you put your money while you wait on PFE to rebound?

[amerlafrance]

Yes, where else? But you have to look at more than yield; lots of financials have even better yields. I think I can see the future of PFE much better than the future of financials. However, to me the known unknown is the political arena, which is not mentioned above and can turn the future for PFE as cloudy as a black box fund or the most obtuse financial statement of a large bank. Even with the yield, I am inclined to play this with calls to limit risk.

[notsosmart]

the increased "yield" on a lot of falling stocks can be a dangerous trap. i have no connectin to wall st. or fims mentioned.(and no agenda).checkout FRO & NAT.

[tankerman]

notsosmart: while I agree that just looking at yield is dangerous, I'm not sure I get your point regarding FRO. I bought some shares of FRO in May 2005, in the low $50s, with dividends automatically reinvested. The stock dropped as far as into the low $30s, and took over 2 years to return back to the low $50s, but during that time, the reinvested dividends accumulated a boatload of shares. Including reinvested dividends, and an appreciated stock price, my initial investment has tripled in just over 3 years, so while FRO's 18%+ dividend yield seems scary initially, it's worked out well for those who've had the patience to hang in there for the long haul...

[ertsfan]

Not only does PFE pay a great dividend, but when you sell you'll have a great write off.

[notsosmart]

tankerman-sorry i was not clear .i bought fro@30 &for me its been great.the long haul actually not that long has been great.no one has figured a way to pave over the ocean.

[[e-mail]]

Their running with scissors.

[John H.]

Why does Pfizer not settle the 300 Mirapex lawsuits brought on by people with Parkinsons. The drug caused compulsive behavior including compulsive gambling. Have these patients suffered enough? with thought it would be less costly to Pfizer to settle and would be doing some good for mankind.

[warren1961]

tankerman
how did you set up the auto invest for the dividends .. was that direct through the company in a DRIP or with your broker

thanks
warren


On Jun 29 04:07 PM tankerman wrote:

> notsosmart: while I agree that just looking at yield is dangerous,
> I'm not sure I get your point regarding FRO. I bought some shares
> of FRO in May 2005, in the low $50s, with dividends automatically
> reinvested. The stock dropped as far as into the low $30s, and took
> over 2 years to return back to the low $50s, but during that time,
> the reinvested dividends accumulated a boatload of shares. Including
> reinvested dividends, and an appreciated stock price, my initial
> investment has tripled in just over 3 years, so while FRO's 18%+
> dividend yield seems scary initially, it's worked out well for those
> who've had the patience to hang in there for the long haul...
>