Pfizer’s stock has been struggling for multiple years, and even a low valuation hasn’t made it an enticing option for many investors.
Pfizer (PFE 1.03%) is one of the largest healthcare companies in the world. It was founded in 1849 and has since become an iconic name in healthcare.
It has developed many medicines over the years; most recently, it has been known for developing its highly successful COVID vaccine Comirnaty. Growth and innovation have enabled the company to become a household name and a leader in healthcare.
Investors, however, have been having doubts about the business and its ability to grow in the future. In the past three years, the stock has produced negative returns. Since 2022, It has lost more than half its value. Can the stock break its downward streak, and finish this year in positive territory?
Image source: Getty Images.
A recent deal with the White House gives investors hope
For a while, it looked like Pfizer’s stock was destined for another year in the red. The U.S. government has been targeting pharma companies with tariffs this year, and tougher vaccine policies have also been weighing on the company’s valuation.
But on Sept. 30, Pfizer reached a deal with President Donald Trump that will give it a grace period of three years before tariffs would be applied to its imported pharmaceutical products. The company is voluntarily lowering the price of drugs for Medicaid and will sell some drugs on TrumpRx, a new government-run direct-to-consumer website for pharmaceuticals. In addition, the company also pledged to invest $70 billion on research and manufacturing in the U.S. over the coming years.
This appeared to alleviate at least some concerns for investors because shares of Pfizer jumped on the recent news. On Oct. 1, it closed above $27 for the first time since January. The stock is now in positive territory for 2025, with year-to-date gains around 3%. It’s not a huge return, but it is an indication that investors are feeling a bit more bullish about the healthcare stock again and that it might be able to finish the year in the green.
Pfizer still faces a lot of questions
Although the stock has been rallying recently, it’s not out of the woods by any means. COVID sales are diminishing for Pfizer, and the company is facing patent cliffs on multiple key drugs.
CEO Albert Bourla has previously said the company could stand to lose between $16 billion and $18 billion in revenue between 2025 and 2030 as it loses patent protection on some of its drugs. However, he’s also planning to add $25 billion in new revenue by the end of the decade through acquisitions and research and development.
Its acquisition of oncology company Seagen could generate up to $10 billion in sales by 2030 alone. It was also expecting that its mRNA vaccine portfolio might bring in a similar amount, but that is questionable now that the U.S. government appears to be rethinking vaccine recommendations.
The business may end up looking a whole lot different over the next five-plus years. While its fundamentals still look good (it generated nearly $11 billion in profits over the trailing 12 months), investors are hesitant about whether or not they can trust this struggling stock, especially amid such uncertain times in the healthcare sector.
Why Pfizer may be worth taking a chance on
There’s definitely risk with investing in Pfizer as it’s taking on multiple acquisitions and facing patent cliffs, and there are plenty of question marks around its vaccine sales. However, with a beaten-down valuation, a price-to-earnings multiple of less than 13, and a price-to-earnings-growth ratio right around 1 (based on analyst projections), it’s a low-priced stock that comes with a good margin of safety.
Pfizer has been working on expanding its pipeline and giving itself more opportunities to grow in the long run. Although not all of its efforts might pay off, even if some do, there could be plenty of catalysts in the future to send the stock higher.
Whether it breaks its streak of declines this year is irrelevant because investing in a quality company at a cheap price could ensure your investment ends up in the green over the long haul, and that’s why Pfizer looks like a solid buy, regardless of what happens in the short term.
David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Pfizer. The Motley Fool has a disclosure policy.