Shortly after the coronavirus (Covid-19) pandemic sent the world into a series of lockdowns, pharmaceutical company Pfizer, along with its partner firm, BioNTech, saw an opportunity to develop a Covid-19 vaccination using innovative technology and supported by $800 million in funding. Although the Pfizer (PFE) stock price dropped dramatically in late March 2020 during the largest stock market crash since the financial crisis of 2008, it quickly rebounded and is now at an all-time high.
The Initial Surge
The beginning of the steep rise in the PFE stock price was marked by a report of the vaccine’s promising preliminary results which was published on 9th November 2020 and caused the stock price to climb nearly 8% to $37.14, which was its highest level since the 2020 crash and a 52-week high for the stock price. After the vaccine’s approval in the USA and UK in December 2020, the stock price rose to a new high of $42.56 – its highest level since 2000.
As millions of people were receiving the vaccine during the first half of 2021, the stock price remained consistent, excluding a dip in February and a 1.4% fall on June 23rd after the CDC found a link between the Pfizer/BioNTech vaccine and heart inflammation. However, it began to rise steeply from July 2021 onwards after Pfizer and BioNTech announced that they were testing the third dose of their Covid-19 vaccine against the Covid-19 Delta variant. The stock price rose 11% in just twenty-one days, reaching record highs and has continued to rise since. Two recent events in August 2021 explain the continuous bullish trend: the calls for booster shots in the winter and the announcement of full approval of the Pfizer/BioNTech vaccine in the USA. The response to these developments culminated in a record high Pfizer stock price of $49.92 at close on Monday 23rd August.
Future Price Movements
Forecasts for the next 12 months suggest a decline in PFE of almost 12%, estimating a median price of $44 by the end of the period, however, the analyst consensus rating is to hold. There are some suggestions that the surges caused by news of the vaccine may be short-lived and that PFE may only serve as a good short-term investment as its movements during the last year have relied heavily on announcements related to the vaccine. However, this may become less relevant in the next few years.
- Pfizer’s Return On Assets (ROA) is 7.81%, which outperforms 92% of its peers in the pharmaceuticals industry, which has an average ROA of -30.35%
- PFE has a profit margin of 24.77%, compared with the industry average of -116.24%
- PFE has a Price/Earnings (P/E) Ratio of 15.87, which is comparable to that of its industry competitors, therefore the stock is currently valued at the right price
- Pfizer’s EV/EBITDA Ratio is 16.34, which is on par with the industry average
- Earnings Per Share (EPS) has grown by 9.03% over the past year and by an annual average of 4.33% over the last 5 years. It is set to grow at a similar rate over the next 5 years
Right now, it seems like PFE is a good buy and even better to hold, but how long will this last once the Covid-19 vaccine is out of the picture?
– Emma Monaghan, The London School of Economics and Political Science