Pfizer (NYSE: PFE) is not currently considered a popular stock pick. After experiencing significant growth during the peak of the pandemic, mainly driven by optimism surrounding its COVID-19 vaccine, subsequent avenues for expansion have not yielded comparable returns.
Nevertheless, for potential investors, there may be an opportunity to acquire shares once some of the more optimistic forecasts about its future performance are adjusted. First, we will explore the pessimistic views regarding why purchasing this stock may not be advisable before delving into the more optimistic perspectives.
Challenges in Recent Years
In typical circumstances, a major pharmaceutical company with a diverse range of essential medications and recent successes like the Comirnaty vaccine would be thriving. In this scenario, the investment thesis would be clear – invest in the company since it consistently generates value by successfully developing the right drugs for the right markets, leading to stock price appreciation over time.
However, Pfizer finds itself in a different position currently. Rather than being a dominant force, it appears to have lost its luster. Over the past three years, its stock has decreased by 19%, while the S&P 500 has increased by over 32%. During the same period, its revenue grew by a modest 6%, totaling $58.5 billion, but its net income plummeted by 83% to $2.1 billion.
Furthermore, the company carries a substantial debt and capital lease obligations amounting to $75.3 billion. While it should be able to manage its debt, interest expenses will likely hinder earnings growth for the foreseeable future. Moreover, Pfizer was not experiencing rapid expansion before benefitting from COVID-19-related medications.
There is also skepticism about the potential for another windfall. The significant declines in revenue and earnings are largely attributed to decreasing global demand for COVID-19 vaccines and antivirals. Overall, the financials and broader market conditions do not paint a positive picture for the company.
It seems unlikely that Pfizer will regain its past levels of revenue, profitability, or stock value soon. It appears that the one-off success with COVID-19 medications did not translate into long-term…
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