Do We Still Rate Pfizer an 8/10? - InvestingChannel

Do We Still Rate Pfizer an 8/10?

Proprietary Data Insights

Financial Pros’ Top Drug Manufacturer Stock Searches in the Last Month

Rank Name Searches
#1 ‘Pfizer Inc 145
#2 ‘Eli Lilly and Company 104
#3 ‘Bristol-Myers Squibb Company 64
#4 ‘Johnson & Johnson 62
#5 ‘Biogen Inc 26
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Do We Still Rate Pfizer an 8/10?

Back in February, we covered Pfizer (PFE), the top drug manufacturer sought out by financial pros.

Despite slowing Covid sales, the company still remains in the top search spot.

However, shares have slid more than 20% since we rated the stock an 8/10.

In light of a +20% YoY revenue decline and the falling stock price, we felt it was time to revisit our analysis.

Pfizer’s Business

Pfizer is a titan in the biopharmaceutical industry, known for its relentless pursuit of health breakthroughs. 

Most of you probably know them for their COVID-19 vaccine, developed in collaboration with BioNTech, which now includes a component targeting the Omicron variant XBB.1.5 of SARS-CoV-2.

The company develops and produces various medicines and vaccines, covering areas like immunology, oncology, cardiology, endocrinology, and neurology. 

Serving customers worldwide, Pfizer’s portfolio boasts some of the highest-selling products in the pharmaceutical industry.

  • Pfizer Biopharmaceuticals Group (75% of total revenues) – This segment encompasses six business units: Oncology, Inflammation & Immunology, Rare Disease, Vaccines, Internal Medicine, and Hospital.
  • Upjohn (23% of total revenues) – Upjohn focuses on off-patent branded and generic medicines.
  • Consumer Healthcare (2% of total revenues) – This segment takes care of over-the-counter (OTC) medicines.

The company remains in the spotlight, with its COVID-19 products losing steam. 

In 2022, they made up more than half of Pfizer’s revenues.This year, they’re running around 30%-32%.

This isn’t to say Pfizer was caught flat-footed.

The company laid out plans to plow Covid profits back into R&D to launch non-Covid related products over the coming 5-6 years.

Reinvesting profits

Source: PFE Q2 2023 Investor Relations

Based on the company’s current pipeline, they seem well-positioned to achieve those milestones.


Source: PFE Q2 2023 Investor Relations



Source: Stock Analysis

Pfizer’s gross margins contracted some 10% as inflationary pressures took their toll.

Operating and profit margins are high but declining as Covid-related sales wane.

Management said they expect the cost of sales to remain at 28%-30% through 2023, with R&D expenses at $12.4-$13.4 billion and SG&A at $13.8-$14.8 billion, both a bit higher than Wall Street anticipated.

With $65.6 billion in total debt and $20.1 billion in net debt, the company has plenty of cash for acquisitions and investment. However, with interest expenses at $1.4-$1.5 billion, it would behoove them to pay down the debt.



Source: Seeking Alpha

You might be inclined to say – Wow, Pfizer’s such a deal at 6.9x earnings and 12.9x cash.

But remember the past performance stems from Covid sales.

The forward estimates don’t look so hot.

However, if we consider Pfizer’s peers, only Bristol Myers Squibb (BMY) trades at a lower price-to-cash flow ratio.

And the big winner of 2023, Eli Lilly (LLY) trades at extremely lofty multiples.



Source: Seeking Alpha

Obviously, Pfizer’s revenue growth is falling fast. That’s trickling down to profits and cash flow. However, nearly every other peer, save for LLY, expects revenue declines this year. 

What’s interesting is the only one projected to grow EBITDA next year is Johnson & Johnson (JNJ).



Source: Seeking Alpha

While Pfizer’s free cash flow is strong, it could be higher by paying down its debt.

Currently, it’s the worst amongst the group, even lower than Biogen (BIIB).

Our Opinion 8/10

Despite the huge selloff, we believe Pfizer’s pipeline will deliver key wins in the coming years.

The plan to achieve $84 billion in non-Covid revenues by 2030 might seem cheeky given revenues hit $100.3 billion last year.

However, we see it as a realistic acknowledgment of the challenges ahead and their pathway forward.

With a 5% dividend, we’re comfortable starting a decent-sized position here.

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