Key Points
- Pfizer stock is down over 60% from its pandemic peak due to declining COVID-related sales.
- The company scrapped its weight-loss drug due to safety concerns. Regulatory and political pressures are expected to impact future revenues.
- Pfizer maintains strong financials and is launching a $7.7 billion cost-savings plan.
- The stock trades at a low P/E ratio and offers a 7.3% dividend yield, suggesting deep value.
Pfizer (NYSE: PFE), once hailed for its pandemic-era success with Comirnaty and Paxlovid, has seen its stock tumble more than 60% from its highs. While those COVID-related revenues are now a thing of the past, Pfizer is grappling with many new challenges that continue to weigh on its performance.
Most recently, Pfizer discontinued the development of Danuglipron, a promising weight-loss pill, after safety concerns regarding liver toxicity emerged. This setback dashes the company’s hopes of tapping into the booming obesity drug market. Political and regulatory headwinds compound the pressure.
Health Secretary Robert F. Kennedy Jr. has criticized the pharmaceutical industry, and former President Trump issued an executive order targeting lower drug prices. Additionally, Medicare reforms tied to the Inflation Reduction Act are expected to shave $1 billion off Pfizer’s 2025 revenues. Trade tariffs could further complicate global manufacturing strategies.
Despite these blows, analysts suggest that Pfizer’s issues may be more akin to “paper cuts” than fatal injuries. The company maintains a robust drug pipeline, especially in oncology, and has initiated a cost-cutting strategy to save $7.7 billion by 2027. Pfizer also boasts investment-grade credit and a manageable 61% dividend payout ratio based on 2025 earnings guidance.
The stock trades less than 8 times its projected 2025 earnings, contrasting with the S&P 500’s P/E ratio 28. This low valuation implies that market expectations are already quite pessimistic. For investors, this could create a unique opportunity. With a 7.3% dividend yield and modest earnings growth of 3–5%, Pfizer could deliver annual returns exceeding 10–12%.
If the company exceeds growth expectations or sees a valuation rebound, investors could enjoy an even greater upside. While risks remain, Pfizer’s discounted valuation, stable financials, and high yield make it a standout candidate in today’s pricey stock market.
