FEAR PRESENTS A BUYING OPPORTUNITYThe deteriorating sentiment over the last 3 years has created a substantial buying opportunity.
The negative sentiment can be attributed to 4 main things- decreased EPS/ Net Income since 2022/2023 (end of COVID $$), increased debt levels post-Seagen acquisition and revenue challenges due to upcoming patent expirations.
While these concerns are not unwarranted, it is important to note that Pfizer has been through several patent cliffs before while simultaneously growing dividends .
The notable upcoming expirations include the pneumonia shot Prevnar in 2026 and the cancer drugs Ibrance and Xtandi, both in 2027. Pfizer has an exceptional history of capital preservation and therefore will continue to take action to address any potential revenue shortfalls including aggressive cost-cutting measures already in progress.
From a valuation perspective, PFE's shiller PE is currently 9.51 or 94% as low as it has been in the last 10 years and also 89% better than 462 companies in the drug manufacturing industry.
Seeking Alpha gives PFE a grade of F on Growth, but when looking at the individual characteristics not 1 is below a D and only two are D's, and in aggregate looks much better than SA is portraying with a grade of F. Pfizer should not usually be expected to be a grower as it is a mature company.
From a technical standpoint it looks like a double bottom is forming at the bottom of a 12 year trend line.
The Price/ FCF and EV/EBITDA ratios have decreased back to 2023 and prior levels indicating it is no longer overvalued as it was in 2024.
Reverse DCF based on EPS w/out NRI and an 11% discount rate show thaf Pfizer's fair value is $35.89, indicating a 27% margin of safety.
The recent volume shows large-scale buying, probably by institutions.
Overall I believe the negative sentiment mostly due to the upcoming patent expiration and the realization of loss of revenue from COVID era $ is currently baked into the price and presents a decent buying opportunity.
