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Pfizer: How It Could Double

Apr. 01, 2022 12:24 AM ETPfizer Inc. (PFE) Stock71 Comments
Brian Kapp, CFA profile picture
Brian Kapp, CFA


  • Since my report on 10-18-21, consensus earnings estimates for Pfizer have risen 94% and 57% for 2022 and 2023, respectively. Growth estimates are now materially higher through mid-decade.
  • After rallying 50% in just two months following my last report, Pfizer shares have now returned 29% compared to 3% for the S&P 500. The question: can the outperformance continue?
  • While sales and earnings estimates have exploded to the upside, Pfizer’s valuation multiple remains unchanged at a mere 12x the 2024 consensus EPS estimate and 7x the 2022 estimate.
  • The company generated an incredible $30 billion of free cashflow in 2021 and may materially surpass this in 2022.
  • Pfizer is now embarking on a historic growth investment cycle at a technological inflection point for biotechnology, making it a profoundly asymmetric opportunity.

Exterior view of Pfizer Pharmaceutical company"s offices in Brussels, Belgium

Alexandros Michailidis/iStock Editorial via Getty Images

I am maintaining a positive risk/reward rating on Pfizer (NYSE:PFE) based on its aggressive growth strategy, rapidly increasing growth estimates, a deeply discounted valuation, and unusually strong technical support.

Risk/Reward Rating: Positive


This article was written by

Brian Kapp, CFA profile picture
I am the co-founder and CEO of stoxdox, Inc., a universal platform for professional quality stock and investment research. I started in the investment industry in 1996 and spent the first half of my career as a portfolio manager at Merrill Lynch then UBS Financial Services. Later, I founded and served as the portfolio manager at both Kapp/Scanlon Financial Group and Oasis Capital. I am a CFA® charterholder and earned a BS in Industrial Management and a BS in Economics at Carnegie Mellon University. My experience combined with a strong foundation in strategic management and economics offers a uniquely full-spectrum, full-cycle, and global perspective.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (71)

What an excellent analysis! With the rise from the recent low point of $41.75 to $54.48 (30.5% increase), do you believe is this the time for PFE price to drop?
Brian Kapp, CFA profile picture
@thefirstrule Thank you very much. Short term it could back and fill but should have strong support in the high $40's to low $50's. Intermediate to longer term I think Pfizer will remain in a bull market.
@Brian Kapp, CFA Paxlovid is an amazing product for COVID.
They will make a lot of money in the short term.
PFE is doomed. It will be sued into bankruptcy by the victims of its so-called safe and effective "vaccine."

@hannytuc777 I don't think that the vaccine makers can be sued
for these vaccines.
Steve Rasher profile picture
@hannytuc777 The vaccine manufacturers are immune from suit. In March, 2020 the Secretary of Health and Human Services issued a Declaration Under the Public Readiness and Emergency Preparedness Act for Medical Countermeasures Against COVID. See: 19www.federalregister.gov/...
As a result, the vaccine manufacturers are immune from suit. Steve
Sage Advisors profile picture
PFE has a low growth (3-6%) base business and a pipeline that is suboptimal. In fact, IMHO, it is one of the least exciting in the large cap pharma space. Paxlovid sales may or may not hit the targets which appear optimistic which also poses risk to the thesis.

Thankfully, PFE has a pile of cash. Their future depends on their ability to buy a better pipeline but they have not done enough on this front especially given biotech valuations are incredibly depressed. IMHO, this thesis depends on whether they will buy the right assets at the right prices. PFE has a history of being very strong on the sales/marketing so hopefully they will chose assets well.
Brian Kapp, CFA profile picture
@Sage Advisors Trading at 10.5x the 2024 consensus estimate, I'd say the market is pricing in low expectations for Pfizer's growth potential. The valuation may even reflect expectations for materially less than 3-6% base growth.

I do agree that the biotech valuation correction is well timed from Pfizer's perspective. Pfizer should be able to deploy its capital at excellent rates of return if it stays disciplined and focused. The timing couldn't be better.
@Brian Kapp, CFA IMHO the timing got better and deals are at the ready. Buying got cheaper and now there is a defined lockout period to cash out of consumer.
What is Pfizer going to do with all that money they have from Covid vaccine sales ?
@Dominic7 same question I asked. It is wise to buy back shares, given PFZ's outsized outstanding shares, in addition to investing for future growth (aka M&A).
Brian Kapp, CFA profile picture
@eyeatbay I agree that an opportunistic share buyback strategy is wise; to be deployed on deep selloffs to maximize the return on capital.

The downside of buybacks is that they do not move the valuation needle, which is Pfizer's share price challenge at 10.5x the 2024 consensus estimate.

For example, $27 billion could buy back roughly 10% of the shares. If the valuation multiple remains the same, that would generate a 10% share price bump. If that $27 billion is instead invested in ways that increase investor confidence in future growth, Pfizer's valuation multiple could materially expand. The market multiple is in the 20x range which would be a double for Pfizer's shares, give or take. If earnings estimates then begin to increase, Pfizer's shares would receive the benefit of multiple expansion and increasing earnings estimates.
@Brian Kapp, CFA Agreed. Pfizer should do both share buyback and investing for growth. The reality is that Pfizer does the latter only. Given the piles of cash sitting around, Pfizer can deploy them wisely, instead of collecting 0.1% interest.
I have been scratching my head as to why the SP is still so low. Pfizer should be printing money in the next few years.
excellent article. PFE prospects (as well as “strategic technology partner” BNTX btw) are limitless when you understand the potential of the M-RNA science. This pertains to new products and therapies that aren’t accounted for in any present financial analysis. To explain the scientific/therapeutic potential, you have to understand that ANY disease that has a genetic protein deficiency or irregularity- has the potential to be “cured” by having the host (human body cells) act as factory to create the missing/defective protein. This potential is beyond huge, and very exciting. To all the very smart financial analysts without a science, medicine, physiology background- it is hard to grasp what this means in regard to an often quoted concern of a “diminishing new product pipeline”. NOT by a long shot.
Brian Kapp, CFA profile picture
@Skozinnmd Thank you very much, I appreciate it.
VAERS data are concerning. Many people died and were injured if VAERS (and DMED) data are to be believed.
edaskew profile picture
@hannytuc777 Not if the data are understood.
@edaskew VAERS data released Friday by the Centers for Disease Control and Prevention included a total of 1,217,333 reports of adverse events from all age groups following COVID vaccines, including 26,699 deaths and 217,301 serious injuries between Dec. 14, 2020, and April 1, 2022.
edaskew profile picture
@hannytuc777 Right, but that is a temporal association, and not necessarily cause and effect. More than 200 million people, none of whom were immortal, were vaccinated. The expected mortality rate is 1.1% per year, so that's 2.2 million per year, and 42,000 per week. That's being conservative, because as you know, older and sicker people were more likely to be vaccinated, and children were not vaccinated. You can apply, if you are able, the same logic to adverse events. Obviously, there was no grand conspiracy to kill people with vaccines. This is observational data, and that's why we don't use observational data to evaluate treatments. We use randomized, double blind, placebo controlled trials.
Author seems right on the spot here. Last 48 hrs Citi raises target from $46 to $57 which in my opinion is still laughably low and government still owes 5 B for Paxlovid which hopefully will come out of new pandemic funds in latest spending bill... holding onto my PFE for at least next few quarters...
With a 1-3 reverse stick split…following the release of all the FOIA information that the firm and the FDA are trying to stonewall.

dukemorty profile picture
Excellent analysis Brian -- I am an instant follower. Regarding Paxlovid, peak sales could be substantially greater the purported $22Bin FY22. The US committed early on to purchase 20MM doses (@$530 per or ~$10B) and Global demand has been estimated at ">220m doses". In response, Pfizer is aggressively scaling manufacturing capacity worldwide and "...will have 180M doses of treatment ready by the end of the year" (NPR HealthNews)
Given 30MM doses will be manufactured by end of Q2 - the vast majority of remaining FY22 manufacturing capacity (150M doses) would be available in the second half of this year if these projections hold. Not sure what the Paxlovid shelf life is -- or implications of buy back obligations thereof but my guess is that the US is not the only country buying capacity.
Bottom line, PFE has set the table for growth & outperformance --- notwithstanding their exceptional M&A opportunities --- while offering a healthy dividend for those who participate.

(I am long PFE)
Brian Kapp, CFA profile picture
@dukemorty Thank you very much, I really appreciate it.
Pfizer should spend some money on shares buyback. It seems no-brainer.
Brian, is there any risk to the aggressive-growth strategy, where regulators may step in and limit any upcoming planned acquisitions due to anti-competitive concerns? Or does that issue not come up much in the Pharmaceuticals industry? Thank you for the through article.
Brian Kapp, CFA profile picture
@User 7759181 Thank you. I don't see an antitrust risk for Pfizer's acquisition/growth strategy. The industry is extraordinarily competitive, and the patent timelines prevent long-lived monopolies in any given treatment area.
Jim in Hav profile picture
Wait for the vaccine lawsuits to start piling in.
@Jim in Hav Vaccine makers are immune from lawsuits concerning the Covid vaccine.
Stocks&dumbells profile picture
@Dominic7 not if fraud is proven which is plausible.
buckiowa profile picture
I’d be careful on the long term here. The shot did not go so well for a certain percentage of the people .
@buckiowa what is the % you are referring to
Doubt they will get the credit for vaccine sales going forward. This could be an annuity for them just like the flu shots.
This is a no brainer.
The massive free cash flow PFE got from the COVID related products, will be used for major acquisitions. They will strike when a great opportunity comes their way.
lshiang profile picture
I tend to agree with the sales forecast for 2022 thru 2025. Therefore, PFE appears to have momentum to achieve 20-30% upside potential in 2022 and will most likely fall back to the current level beyond 2023. It should be noted that Pfizer is already so big that doubling its market cap would become a very unlikely scenario.
Chris Lau profile picture
Good article. PFE had alot of shares outstanding. So, I've got MRK, BMY on the list first.
A great article, Brian. I started working at Pfizer R & D in 1982 & retired in 2010. Still holding on to all my PFE stock since 1982.
Brian Kapp, CFA profile picture
@mjawadekar_0 Thank you very much, I appreciate it.
Blacklick Capital profile picture
excellent drill down and overview for a long buy and hold. The investments made by Pfizer are impressive.
Brian Kapp, CFA profile picture
@Blacklick Capital Thank you very much, I appreciate it.
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