Why I’m Buying Pfizer And You Should Too

Published on

Pfizer Inc. (NYSE:PFE) has a bright future ahead of it. Detractors of the company point to the fact that COVID-19 has reached its peak, and therefore the company will experience reduced demand for one of its best-selling vaccines. However, it is also becoming apparent to me that the virus will remain an endemic disease, much like the seasonal flu, and will therefore the vaccinated population will require a consistent stream of boosters in order to keep on top of it for the foreseeable future. Furthermore, as the virus mutates it’s understood that the first-generation vaccines will become less effective over time, so the demand for new vaccines to respond to the virus’s mutations will be a major tailwind for the company.

Get The Full Series in PDF

Get the entire 10-part series on Charlie Munger in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues.

Q1 2022 hedge fund letters, conferences and more

The catalyst of COVID-19 aside, Pfizer has also smartly invested a large portion of its war chest into diversifying itself by adding over 80 different drugs and pharmaceutical products to its pipeline. This is backed by the company’s impressive financial strength that will allow it to grow through acquisitions, as well as provide a rock-solid balance sheet to ride out the volatility that’s expected as we head into the next bear market.

Pfizer's Financials

Pfizer has beaten analysts’ expectations for four straight quarters, growing its EPS at a respectable margin. The company is currently trailing slightly below the MarketBeat consensus price target by 12%, and with the company’s future prospects in mind, this could be an indication that the stock is currently undervalued.

Pfizer reported an 82% operational revenue growth in Q1’22, which came along with a 76% diluted EPS growth. This strong growth in sales was driven by a huge number of new patients taking its medicines and vaccines, which represented a 140% increase YoY to 468M. These numbers are all reflected in the company’s bottom line, as its operating cash flow skyrocketed to $34B over the last twelve months, up from $10B. There are now more cash and short-term investments than ever on the company’s balance sheet, which currently stands at $31.07B, which is more than enough to cover potential acquisitions or to return value back to its shareholders directly.

Opportunities For Future Growth

From a product development standpoint, Pfizer has multiple avenues to continue its growth in the future. In addition to working on future COVID-19 vaccines, it’s also developing treatments for a wide number of health conditions, including hemophilia, influenza, breast cancer, and others. For the rest of FY 2022, the company is expected to grow its revenues to $24.61B as the consensus revenue target. In the near future, it intends to treat 225M people by 2025, as well as continue its work on creating a universal vaccine that will work to treat a range of coronaviruses.

The Bottom Line

Although Pfizer may not continue its meteoric performance in the future, the demand for its treatments and vaccines is undoubtedly going to continue strong as the world still comes to grips with COVID-19 as its major tailwind. The earnings the company has made over the last twelve months give it ample opportunity to research new treatments to increase its sales and revenues further, and its sales growth gives investors a sense of consistency in an uncertain time in the market.

Article by Matthew North, MarketBeat