Pharmaceutical giant Pfizer’s (NYSE:PFE) stock is down over 14% in the past year. At the same time, rivals Eli Lilly (NYSE:LLY) and Novo Nordisk (NYSE:NVO) have gained over 114% and 77%, respectively. Interestingly, there are two reasons why financial blogger Michael Byrne believes that Pfizer shares could show massive price appreciation in the long run. Plus, there is one huge advantage of owning Pfizer stock. Let’s look at the three factors quickly.
- Pfizer Trades at Cheap Valuations: PFE trades at a forward P/E ratio of 12x (2024 earnings per share estimates). This is nearly half the P/E multiple at which the S&P 500 index (SPX) trades, 24.2x. Similarly, LLY and NVO trade at 68.3x and 41.4x time 2024 earnings estimates, respectively. Pfizer’s depressed valuation simply puts in perspective the huge scope for growth in PFE shares.
- Pfizer’s Entry in Weight Loss Drug Market: Pfizer is entering the weight loss drug market with the development of a once-daily oral drug, danuglipron. The company will undertake clinical trials in the second half of this year. Notably, rival companies Eli Lilly and Novo Nordisk saw their share prices skyrocket on the commercialization of their respective injectable weight loss drugs, Zepbound and Ozempic. Should Pfizer successfully launch its weight loss drug in the market, it could boost its financial performance and share price levels, albeit not necessarily to the same levels as its peers. For reference, some analysts are predicting the weight loss drug market to grow to over $100 billion annually by 2030, showing high scope for market share gains by multiple players.
- Pfizer Boasts a Solid Dividend Yield: Pfizer has a current dividend yield of 5.74%, significantly higher than the sector average. PFE stock pays a regular quarterly dividend of $0.42 per share, which has grown steadily over the past 13 years, making it an attractive dividend stock to consider.
Key Takeaways
Pfizer’s shares are not performing as well as its peers, and underperforming the broader market. Having said that, Byrne believes that shares could witness a solid jump, if and when the oral weight loss drug becomes a success. Additionally, PFE shares are trading at a heavy discount to the sector and also carry a superb dividend yield, making Pfizer an attractive stock to consider adding to your portfolio.
