Pfizer Inc. (NYSE: PFE) hogged the limelight yesterday after Akash Tiwari, an analyst at Jefferies, upwardly revised the pharma giant’s rating to buy from hold, citing multiple factors such as the exceptional performance of Comirnaty’s Covid-19 vaccine, Paxlovid (a co-packaged medication for COVID-19), cost-cutting efforts, and the expected conclusion of the Seagen (Nasdaq: SGEN) takeover deal. The stock of Pfizer ended Tuesday’s trading session at $32.75, down 1.56% or $0.52 from the prior close.
Interestingly, the rating upgrade was issued after the New York-based company downwardly revised its full-year earnings and revenue outlook by $9 billion, citing declining demand for its COVID-19 medication, Paxlovid. Vaccine manufacturers mainly rely on the US market, as several countries have limited yearly programs for booster doses.
While speaking to analysts, Albert Bourla, CEO of Pfizer, stated that he anticipated about 17% of the population to have booster shots in the prevailing vaccination program, matching last year’s numbers but considerably lower than the levels recorded in the March-June period of 2021, when the vaccine was introduced. Bourla continued by stating that the company is closely tracking the current booster shot program.
Considering the waning sales, the company downwardly amended its full-year outlook for sales of the COVID-19 treatment, Paxlovid, by roughly $7 billion. The company also slashed its revenue outlook for Comirnaty—the COVID-19 vaccine developed in partnership with BioNTech—by roughly $2 billion. The Pfizer CEO also revealed that Pfizer will take a write-down after carrying out similar downward revisions next year.
The healthcare company now expects full-year revenue of $59.50 billion instead of the $68.50 billion projected earlier. Likewise, Pfizer downwardly revised the full-year adjusted earnings to $1.55 per share from the prior level of $3.35.
The Jefferies analyst highlighted multiple factors for an upward revision of the rating and price target. According to Akash Tewari, Comirnaty’s performance is exceeding buy-side expectations. Furthermore, Tewari believes that the cost-cutting plan will enable Pfizer to achieve the earnings per share projection for 2024/25, paving the way for a solid appreciation in price. Furthermore, Tewari’s optimistic view is also strengthened by the expected closing of the Seagen acquisition.
Until a few months ago, Jefferies had a negative view of Pfizer. However, following the revised outlook, the financial institution now believes that the company offers a long-term investment opportunity. Specifically, Tewari believes that the downward revision of the outlook, combined with a cost-cutting program of $3.50 billion, has generated a lucrative investment opportunity.
The Jefferies analyst further opined that Pfizer possesses an intriguing catalyst trajectory ahead, specifically in the large-cap pharmaceutical sector. Despite exchanging hands at about 15% below its pre-pandemic valuation, Pfizer has showcased resilience by adjusting and developing new technologies to confront healthcare barriers.
Tewari reminded Pfizer’s partnership with Biontech, which paved the way for the successful development and launch of COVID-19 vaccines, notably the highly efficacious Pfizer-BioNTech vaccine. Furthermore, Pfizer’s antiviral therapy, Paxlovid, has made a significant contribution to the ongoing efforts to battle the pandemic.
Looking forward, in the post-COVID-19 scenario, Tewari underscored Pfizer’s ability to maneuver the changing environment, specifically concerning pricing drugs related to COVID-19.
Despite a decline of over 37% in 2023 and a considerable decrease of 45% since 2021, when it recorded a steep upswing of 60% driven by bullish sentiments about the global economic reopening, Jefferies trusts that the present momentum presents an ideal time to purchase the stock of Pfizer.
Based on the aforesaid facts, while upwardly revising the rating, Tewari also lifted the price target to $39 from the previous level of $38.
The new wave of worries raised by Pfizer regarding the future size of the COVID-19 vaccine market in the US also had a cascading effect on the share price of its German collaborator BioNTech (22UAy.DE) and smaller competitor Moderna (MRNA.O). This is because BioNTech, Novavax, and Moderna have no other FDA-approved drugs other than Covid-19 vaccines.
The rating upgrade is expected to keep Pfizer’s stock slightly bullish in the short term.
The historical price chart indicates that the stock of Pfizer is consolidating after testing support at $32.20. The next resistance is anticipated to be only near $34.50. Additionally, the stochastic oscillator is near the oversold region. Therefore, we anticipate a short-term rally in the days ahead.
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