Is a 2X Return Possible for Pfizer Stock?

Pfizer stock (NYSE:PFE) is trading at around $30 per share; This is close to the lowest levels seen in recent years. Could the stock’s value more than double in the next few years? Does this sound a little ridiculous? Consider this; Pfizer shares were trading at $54 per share about three years ago. Although it is struggling with many problems, such as falling sales due to the decrease in demand for Covid-19 products and increasing competition for some of its drugs, the company has various initiatives that can turn things around. In this analysis, we outline a possible scenario that could help push Pfizer shares to around $60 per share. We consider three key metrics: revenues, net margins and price-to-earnings multiple.

Pfizer is a volatile stock, and changes over the last three years have been far from consistent. The return on PFE shares was 67% in 2021, -10% in 2022 and -41% in 2023. In contrast, Trefis High Quality (HQ) PortfolioIt is significantly less volatile, with a collection of 30 stocks. And there is outperformed the S&P 500 every year in the same period. Why? As a group, Genel Merkez Portföy shares provided better returns with less risk compared to the benchmark index; less of a roller-coaster ride as it turns out Headquarters Portfolio performance measurements. So how can Pfizer get back on its feet and rise again? To start, let’s examine the company’s earnings expectations.

Pfizer’s Revenues Will Return to Growth

Pfizer’s sales have seen a v-top chart pattern recently. Pfizer’s revenues It rose from $41.7 billion in 2020 to $100.3 billion in 2022, but then fell to $58.5 billion in 2023 and to $55.2 billion in the last twelve months. If the company can turn things around and grow revenues to high single digits at an average annual rate over the next three years, revenue could grow to nearly $70 billion by 2026, or roughly 20% between 2023 and 2026. .

How can Pfizer do this?

Although Pfizer’s Covid-19 products are losing steam due to falling demand, the company’s new drug portfolio looks promising. The company expects to have eight blockbuster drugs by 2030, thanks to Pfizer’s $43 billion acquisition of Seagen in December last year, which will help achieve that goal. The company is focusing on cancer drugs to support this growth. Some of the potential blockbuster drugs include Atirmociclib, Vepdegestrant, Mevrometostat and Disitamab Vedotin.

Pfizer is seeing strong growth in Vyndaqel and Abrysvo, and continued growth in Eliquis has helped overall sales growth recently. During the six-month period ending June 2024, Vyndaqel sales increased by 68% to $2.5 billion compared to the same period in the previous year, while Eliquis sales increased by 9% to $3.9 billion. Excluding Covid-19 products, Pfizer sales were up 14% year-over-year in the previous quarter. Pfizer appears to have found some ground following falling Covid-19 product sales and will likely return to growth starting this year.

Pfizer Has Room to Expand Its Margins

Pfizer’s adjusted net margins (net revenue, or profit after expenses and taxes calculated as a percentage of revenues) have been trending downward; As sales decreased, it fell from more than 31% in 2020 to approximately 18% in 2023. However, many trends point to improvement and margins could rise to around 30% by 2026.

From where?

First, Pfizer is looking for ways to significantly reduce costs. We aim to save 4 billion dollars by the end of this year. This plan includes large-scale layoffs and cuts in research and development spending. Separately, the company plans to move into biologic drugs to gain greater revenue confidence. Biologics are more expensive and could increase Pfizer’s prices and margins.

How Does This Affect Pfizer’s Valuation?

At its current market price of near $30 per share, Pfizer is trading at around 16 times recent earnings. That number drops to 11 times for 2024, given that the company is expected to see an increase in profitability this year due to cost-cutting initiatives. So what explains the difference in Pfizer’s P/E multiple using 2023 and 2024 earnings? This is because investors are betting that things can get better for the company.

If we combine the scenario we detailed above (which projects revenue growth of roughly 20% between 2023 and 2026) and the scenario that predicts margins will increase from 18% in 2023 to approximately 30% in 2026, an increase of roughly 67%, This could mean adjusted net income will grow approximately 2x, from approximately $10.5 billion (approximately $1.84 per share) to approximately $21 billion (approximately $3.80 per share) in 2023. Good times make it easier to imagine better times, and when that happens, investors may begin to view Pfizer in a more positive light, reevaluating the company’s path to recovery. For example, if Pfizer’s investors allocated a multiple of 18x following its stronger growth trajectory, this could translate into a stock price of approx. $68 per share Assuming earnings per share will be $3.80 by the end of 2026.

What will be the time horizon of this positive return scenario? While our example shows this for a 2026 timeline, in practice it won’t make much difference whether it takes two years or four years. If the turnaround materializes and Pfizer improves its fundamental metrics, we could see meaningful gains in the stock. This is a well-established company with a great history and valuable knowledge in the pharmaceutical market. Our analysis suggests a win is imminent; This may not be quick and may require patience.

And it may be a bumpy ride for a while. There’s a case to be made for sizable long-term gains from Pfizer stock, but if consistent outperformance is at the top of your list, the Trefis High Quality (HQ) Portfolio may be for you.

While Pfizer shares may rebound in the coming years, it’ll be worth seeing how that happens. Similar to Pfizer Pay based on metrics that matter. You’ll find other valuable comparisons for companies in different industries at: Peer Comparisons.

Return	September 2024 MTD (1)	2024 since the beginning of the year (1)	2017-24 Total (2)
PFE Refund	%2	7%	24%
S&P 500 Return	1%	20%	155%
Trefis Strengthened Value Portfolio	1%	15%	761%

(1) Refund starting from 25.09.2024
(2) Cumulative total returns since the end of 2016

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.