It’s rare to get such a massive high-yielder that’s also positioning itself for long-term growth. Of course, shares of Pfizer (NYSE:PFE | PFE Price Prediction) have faced immense challenges in the years that followed its COVID era peak. And while some rockier days might still be up ahead, the company has a lot of promising innovations in the pipeline. Such innovations might take a while longer to bake, but for investors, the 6.5% dividend yield is more than enough of a reason to wait.
Indeed, you could get a far smaller yield for a far less impressive growth profile. Of course, there are risks and great uncertainties, as there is for just about any biopharmaceutical play, especially one that slipped off a bit of a patent cliff. Either way, those seeking value, yield, and potential multi-year recovery gains might find Pfizer to be a rare breed that’s worth stashing away as investors become somewhat less willing to wait around for some sort of breakthrough or blockbuster surprise to arrive.
While Pfizer hasn’t had that needle-moving catalyst quite yet, it does have its hand in quite a few pies. And with some very encouraging developments made in recent quarters, I’d be more inclined to give the stock the benefit of the doubt, even though its COVID vaccine glory days might be out of reach. For now, much of the pressure facing shares of Pfizer comes from the underwhelming guidance.
Don’t let the soft guide let you think shares are a value trap
The management team is staying cautious, with revenue coming in quite lukewarm compared to original expectations. As patent expiries continue to drag down revenues through 2026, with some notable drugs poised to lose exclusivity in a few years out, Pfizer really does need something new to offset more of the revenue bleed on the horizon.
Of course, acquiring promising firms with impressive drug pipelines might be one way. Another is to punch a ticket to the GLP-1 drug race. But even these moves are no guarantee that there will be enough of a cushion in place to pad the fall off the patent cliff. In any case, Pfizer stock looks, more or less, like a value trap at 9.1 times forward price-to-earnings (P/E), with its seemingly “too good to be true” yield of more than 6%.
Combined with the lackluster past decade of performance (can you believe the stock has fallen 5% over the timespan?) and the fact that shares are still more than 55% off their late-2021 all-time highs, it seems like the perennial underperformer is lacking in catalysts.
Though time will tell if there’s real value to be had in the name, I do think that the low correlation to the rest of the market could make Pfizer a very interesting play, especially in light of recent breakthroughs.
Pfizer has a ton of innovation in the pipeline
Whether we’re talking about the Antibody-Drug Conjugates (ADCs) to treat cancer (Pfizer has promising candidates in Phase 2 and 3) or the wealth of other candidates in earlier stages, Pfizer really is shaping up to be a force in oncology.
For investors with a multi-year horizon, such encouraging oncological candidates might be key to helping the firm hit its goal of achieveing $10 billion in oncology revenue by 2030. If Pfizer can hit the target, that would be huge. Personally, I think there’s potential to exceed the target, especially if its later-trial treatments go right.
Beyond oncology, the company’s recent Lyme disease vaccine might be a surprise hit. It’s a breakthrough in its own right, even if the data isn’t perfect. Of course, the vaccine stumbled in a clinical trial, but the 73% efficacy rate is a great start.
Given the promise in the pipeline, perhaps there’s too much worry of the patent cliff priced into the shares today and too little about the breakthroughs and promising candidates going on behind the scenes. In a risk-off environment, it makes sense to hold off on the “show-me” story. But, then again, if you’re paid to wait, the case for buying, I believe, is strong.
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