Why Pfizer Is a Long-Term Investor’s Friend
Investors chasing possible vaccine stocks might be puzzled by the market’s treatment of Pfizer (NASDAQ:PFE) and wondering why Pfizer stock isn’t trading higher.
After all, the New York-based multinational pharmaceutical giant (and its German partner) gained prominence in the battle against the novel coronavirus with an innovative vaccine that apparently delivers impressive protection against Covid-19. This success fueled hope around the world the pandemic can be contained.
Boy howdy, shouldn’t that send a company’s soaring?
Perhaps, but the market – and those who use it – evaluate a stock’s value via a complicate assessment. This review incorporates many factors, primarily the strength of a company’s financial fundamentals. Other factors include demand for products and consumer support.
Pfizer Stock at a Glance
PFE rose over the course of last year. Most likely, traders “priced in” that performance some time ago. Generally, the market has a forward-looking perspective. This outlook can be disrupted, but those effects tend to brief.
To me, Pfizer stock is more a candidate for slow-and-steady status than spectacular surges.
The market already rewarded the stock for its vaccine success. Continued success over the course of this year will almost certainly buoy PFE shares. This will make it easier for the stock to climb on the back of other good news.
Pfizer stock is attractive to investors with a long view because of its development pipeline. The company is focused on generating new products to replace revenue from older medicines. Pfizer has taken steps to move older medicines to other companies. This demonstrates its commitment to stay streamlined and nimble.
Pfizer’s Covid-19 vaccine is a prime example.
Pfizer did not invent the vaccine. Rather, it was a process by BioNTech (NASDAQ:BNTX), a small German-based biotech company, that forms the basis of the anti-Covid drug. Officials of the German company approached Pfizer about partnering to bring it to market.
By being nimble, Pfizer was able to quickly form the partnership and, together with BioNTech, deliver the important vaccine.
This is impressive because Pfizer is a massive company. Its 2019 drug sales revenue totaled $51.8 billion.
The consistency of Pfizer stock is shown by its 52-week trading range. PFE topped the last year at $43.08 per share. But its low point was $27.88, which is far better than many popular stocks. The company’s market cap is about $206.7 billion and its price-earnings ratio about 24.
Its dividend is 4.2%.
A Long-Term Play
As I wrote earlier, Pfizer stock is an excellent candidate for a long-term portfolio. That is, the investor not drawn by quick pops and drops but rather solid performance over years versus months or even days.
I am not alone in this assessment.
My InvestorPlace colleague Larry Ramer recently said the equity won’t soar but it fits the bill for conservative long-term investors. In his article on Jan. 7, Ramer cited the company’s development program and admirable dividend:
I stand by my belief that Pfizer stock is unlikely to get a further, meaningful lift from the vaccine for the coronavirus… As a result, I remain convinced that short-term investors and those looking for a relatively fast growth should not buy the shares. For conservative, long-term investors and those looking for dividend income, Pfizer, however, looks like an excellent buy.
Income investors will appreciate that Pfizer has raised its payout several times and that is expected to continue.
Also, the company has promising new drugs in development and none slated to sunset for several years.
The Bottom Line
Pfizer stock was favored by many investors before its success with a coronavirus vaccine. The company nurtures its drug development program but also is ready for deals with others to bring products to consumers. And remember, its relationship with BioNTech isn’t limited to the Covid-19 vaccine but includes other products as well.
Combined with a hearty dividend of about 4.2%, Pfizer stock is a buy for investors seeking a solid pharma firm.
On the date of publication, Larry Sullivan did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Larry Sullivan is a veteran journalist in Florida who has covered banking and finance for several years. He is a former investing editor at U.S. News & World Report in Washington D.C. and began writing for InvestorPlace in 2020.