Pfizer is included in the cohort of healthcare sector companies experiencing a rally in 2024.

Pfizer Inc. stock has faced a prolonged, year-long decline attributed to the faster-than-expected normalization of COVID product uptake rates in 2023. Despite the challenges, management’s conservative 2024 guidance for COVID product revenues appears to mitigate potential headwinds. With the “clearing event” mostly behind, Pfizer is well-positioned for growth and margin expansion, fueled by both its internal pipeline and recent acquisitions in innovative medicine.

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Pfizer

The stock, currently trading at pre-COVID levels, presents an appealing opportunity for appreciation in 2024, coupled with an approximate 6% dividend yield.

The downturn in 2023, influenced by a $5.6 billion write-off on Paxlovid/Comirnaty inventory and weaker-than-expected 2024 guidance, has led to Pfizer trading at pre-COVID levels. Despite this, improved operating margins, higher EPS, and sustained organic revenue growth indicate positive aspects. Management’s conservative guidance for Paxlovid/Comirnaty is viewed as a de-risked benchmark for future revenues, leaving room for potential upsides. Recent acquisitions, such as Biohaven, Global Blood Therapeutics, and Seagen, are contributing to Pfizer’s growth outside the COVID realm.

Pfizer’s stock, currently trading at a discount compared to peers, positions itself as an attractive investment. The softer demand for COVID products in 2023 led to a $5.9 billion write-off, contributing to multiple compression risks. Management’s 2024 guidance, projecting $8 billion in combined revenue for Paxlovid and Comirnaty, reflects a de-risked scenario compensating for uncertainties in infection rates. The company’s robust respiratory vaccination portfolio and ongoing development of combination respiratory vaccines contribute to long-term revenue potential.

The recent acquisitions, particularly Biohaven, GBT, and Seagen, offer growth opportunities in oral CGRPs, sickle cell disease treatment, and oncology, respectively. Pfizer’s entry into oral CGRPs for migraines through Biohaven’s Nurtec and Vydura positions it for significant growth. The acquisition of GBT enables Pfizer to address sickle cell disease, with the market expected to grow at a CAGR of 35.1% through 2032. Seagen’s contribution, though temporarily dilutive to EPS, provides immediate growth opportunities in oncology through ADCETRIS, PADCEV, TUKYSA, and tivdak.

The Seagen acquisition, costing $43 billion, increases Pfizer’s debt but is expected to contribute over $10 billion to Pfizer’s revenue growth through 2030. While temporarily dilutive to EPS in 2024, Seagen’s integration is crucial for Pfizer’s long-term growth strategy in oncology. ADCs are anticipated to replace traditional chemotherapeutics, and Seagen’s expertise in this area complements Pfizer’s existing capabilities.

Despite near-term challenges, including Seagen-related financing costs, Pfizer’s fundamental analysis forecasts a 3% revenue growth in 2024 to $60.9 billion. The ongoing cost realignment program is expected to yield net cost savings, with Seagen-related financing costs partially offsetting them. The adjusted EPS forecast for 2024 is around $2, aligning with the management-guided range of $2.05 to $2.25. Overall, Pfizer’s outlook, supported by its diverse portfolio and strategic acquisitions, suggests a compelling investment opportunity in 2024.