Three compelling reasons make Pfizer an appealing investment prospect at present.
If you're searching for an underappreciated growth stock to invest in at the moment, consider giving Pfizer (PFE 2.29%) a look. Even though the company faces some challenges ahead, I'm hopeful it can continue excelling with the strategic moves and investments it's been making lately.
Investors might be pessimistic about Pfizer's future, believing that its business will suffer as COVID-related sales decrease and its patents on important drugs expire. However, this viewpoint seems overly negative. Let me share three reasons why taking a chance on this apparently struggling stock could potentially pay off well for you today.
Pfizer is developing a weight reduction medicine
Technology firms rely on artificial intelligence (AI), but in healthcare, the development of weight loss treatments is driving up companies' valuations. Pfizer aims to capitalize on this trend as it intensely works on a weight reduction pill it believes could be among the first to hit the market soon. While there are approved injectable weight loss treatments available, such as Wegovy and Zepbound, there could be an even bigger market opportunity for oral weight loss drugs.
Pfizer has a pill in development called danuglipron, currently in early-stage trials. It's shown to be well-tolerated and safe. Pfizer originally planned a two-dose regimen for the drug, but due to side effects, it modified the plan to a daily dose instead.
In a phase 2b trial, the two-dose variant enabled people to lose up to 13% of their body weight over a 32-week period. If the daily dose achieves similar results without significant side effects, danuglipron has the potential to significantly impact Pfizer's business, as the market for obesity drugs could be worth as much as $200 billion.
Growth in various sectors
What makes Pfizer an excellent investment is its versatility. A clear example of this was seen in its recent earnings report, with Pfizer showing strong growth in various sectors. The company's total revenue for the first nine months of 20XX was up by 2%, reaching $45.9 billion.
This is impressive considering that Pfizer has experienced significant drops in COVID-19-related drug sales. Revenue from its COVID vaccine, Comirnaty, has decreased by 66% this year. However, in the specialty care sector, revenue increased by 11%, and in oncology, the company saw an uptick due to drugs it acquired from Seagen, with revenue rising by 25%.
Pfizer will face challenges as key drug patents expire in the coming years, such as Eliquis and Vyndaqel. However, its diverse operations and focus on investment in growth opportunities put it in a strong position to weather the storm.
High yield and low valuation offer a reason to wait
While there's some uncertainty regarding Pfizer's future, the reason to stay patient is the high dividend it's offering to investors. Pfizer's yield currently hovers around 6%, significantly more than the 1.3% yield offered by the S&P 500 index.
Additionally, with the stock trading at a forward price-to-earnings multiple of 9, investors are getting shares of Pfizer at a discount. This margin of safety helps reduce the risk associated with investment in this uncertain environment.
Pfizer's low price may not remain for long
As Pfizer continues to deliver impressive results and develops drugs in its pipeline, it might gain the interest of growth investors, who may consider it too risky an investment right now. In this scenario, a rally could follow as this struggling stock may be due for a substantial bull run.
If you're prepared to be patient, Pfizer could be one of the best stocks to invest in right now.
Given Pfizer's current low valuation and high dividend yield, some investors might consider it wise to hold onto their shares or even buy more, anticipating a potential price increase as the company continues to deliver promising results and attract growth investors. This could potentially lead to significant returns from investing in Pfizer's stock.
Moreover, the company's emphasis on finance and investing, such as its significant investments in research and development for weight loss treatments like danuglipron, further underscores its potential for long-term growth and profitability in the healthcare sector.
