Pfizer Stock Gains 5% Following Positive 2025 Forecast, Yet Challenges Persist

Pfizer stock (NYSE: PFE) rose 5% on Tuesday, December 17, after the company provided an encouraging outlook for 2025. Pfizer anticipates revenues between $61 billion and $64 billion, with adjusted earnings projected between $2.80 and $3.00 per share. This is in comparison to our current estimates of $63 billion and $2.94, respectively. Despite the recent leadership change at HHS with vaccine skeptic Robert F. Kennedy Jr. at the helm, Pfizer does not foresee significant shifts in vaccine policy for the coming year. While Pfizer enjoyed this uptick, AVGO stock also experienced over 30% gains during the week. Check out our insights on What’s Happening With AVGO Stock?

Recently, Pfizer’s stock has faced pressure due to declining revenues and margins. The demand for its Covid-19 vaccine has decreased, prompting the company to seek ways to close the revenue gap. Over the last two years, Pfizer has pursued growth through acquisitions, including Seagen, Global Blood Therapeutics, and Biohaven. However, investor confidence remains low, contributing to the stock’s decline. For those seeking stability, we recommend the High-Quality portfolio, which has consistently outperformed the S&P, boasting over 91% returns since inception.

In our opinion, Q2 2024 marked a change for Pfizer, as declining sales appeared to stabilize, and expectations for improved sales and margins emerged. Notably, sales of Pfizer’s non-Covid-19 products have increased by double digits in recent quarters. The company has seen significant growth in Vyndaqel and Abrysvo, alongside steady demand for Eliquis. Vyndaqel sales surged 66% year-over-year to $3.9 billion for the nine months ending September 2024, while Eliquis sales increased by 8% to $5.5 billion. Pfizer’s total revenue for the last twelve months reached $59.4 billion, slightly up from $58.5 billion in 2023.

To improve its financial position, Pfizer is implementing a cost-cutting initiative, targeting $4 billion in savings by year’s end. This plan includes substantial layoffs and reduced spending on research and development. Furthermore, Pfizer aims to transition toward biologic drugs, which tend to be more expensive and could enhance both pricing and profit margins.

PFE stock has shown volatility in recent years, with annual returns fluctuating significantly. In 2021, returns soared to 67%, yet fell to -10% in 2022 and -41% in 2023. In contrast, the Trefis High Quality (HQ) Portfolio, which comprises 30 stocks, has demonstrated much less volatility and has outperformed the S&P 500 annually over the same period. This consistent performance can be attributed to HQ Portfolio stocks generating superior returns at a reduced risk compared to the benchmark index.

In light of the uncertain macroeconomic climate, including potential rate cuts and shifts in administration, there are concerns regarding whether PFE might experience another underperformance in alignment with its challenges in 2023, or if it could rebound. Despite its recent increase, we believe that PFE remains undervalued. Currently priced at $26, PFE trades below 9x expected earnings of $2.94 per share for 2025. Historically, the stock averages a P/E ratio of 14x. By comparison, MRK trades at 11x, and both ABBV and JNJ at 14x expected earnings. We predict that this valuation gap will begin to close in favor of Pfizer over the coming years, estimating a valuation around $36 per share, indicating roughly 40% upside potential from its current price.

Although PFE stock appears undervalued, it’s important to compare it with Pfizer’s Peers for relevant metrics. For further insights, visit Peer Comparisons.

[1] Returns as of 12/18/2024
[2] Cumulative total returns since the end of 2016

Invest with Trefis Market-Beating Portfolios
Explore all Trefis Price Estimates

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