Pfizer stock has seen a significant decline, currently trading at $28 per share, 55% below its peak level of $61 in December 2021. This underperformance can be attributed to declining revenues after the surge in Covid-19 vaccine demand during the pandemic. In contrast, Merck stock is up 36% over the same period. Despite the decline, PFE stock was trading at $52 in early June 2022, just before the Fed started increasing rates, and is now 47% below that level. To return to pre-inflation levels, PFE stock will have to gain over 120%, which may not happen soon.
The decrease in PFE stock has been inconsistent, with returns of 60% in 2021, -13% in 2022, and -44% in 2023. In comparison, the S&P 500 had returns of 27% in 2021, -19% in 2022, and 24% in 2023. PFE underperformed the S&P 500 only in 2023. Beating the S&P 500 consistently has been challenging for individual stocks in recent years, including heavyweights like UNH, JNJ, GOOG, TSLA, and MSFT. In contrast, the Trefis High Quality Portfolio, with 30 stocks, has outperformed the S&P 500 every year.
The uncertain macroeconomic environment, with high oil prices and elevated interest rates, raises concerns about PFE’s future performance. From a valuation perspective, there may be limited room for growth, with Pfizer’s valuation estimated to be around $29 per share. This forecast is based on a 13x P/E multiple for PFE and expected earnings of $2.25 per share for 2024. The decline in revenue post-pandemic has led to a lower P/E multiple compared to the last five years.
During the 2022 inflation shock, the Fed’s rate hikes and other factors led to a turbulent market environment. In contrast, PFE stock saw a decline from nearly $25 in September 2007 (pre-crisis peak) to $12 in March 2009, losing 50% of its value. It recovered post-crisis to around $18 in early 2010. Pfizer’s revenue rose during the pandemic but has since declined, with earnings falling as well. The company’s debt has increased, but it has sufficient cash flow to meet obligations.
With the Fed’s efforts to control inflation rates, market sentiments may improve, providing some potential for gains for Pfizer stock. The company expects stable growth from 2024 onward, with sales forecasted to be in the range of $58.5 billion to $61.5 billion in 2024. Despite a robust pipeline, concerns remain about Pfizer’s high debt levels. Overall, Pfizer stock is seen as fully valued, with limited upside potential in the near term. Investors may want to consider peer comparisons and other metrics before making investment decisions.
