Momentum’s leading stockbroking division – Momentum Securities – will be bringing you their Stock Pick of the Week, each week on a Wednesday or Thursday. The stock pick motivation is available as written content and a downloadable video and audio clip.
This week’s pick: Pfizer Inc.
About: Pfizer Inc. is a publicly-traded global pharmaceutical company headquartered in New York City. It is one of the world's largest research-based pharmaceuticals firm, producing medicines for cardiovascular health, metabolism, oncology, inflammation and immunology, and other areas, with about 10 products that fetch approximately $1 billion or more in annual revenue. Its top prescription products include cholesterol-lowering Lipitor, pain management drugs Celebrex and Lyrica, pneumonia vaccine Prevnar, and erectile dysfunction treatment Viagra, as well as arthritis drug Enbrel, antibiotic Zyvox, and blood-thinner Eliquis. The company also makes and sells generic drugs and consumer health products. Pfizer operates around the world and gets about 55% of its revenue from international customers.
Portfolio Manager for Momentum Securities, Chris Napier shares his insight on Pfizer Inc
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• the audio clip
• the video clip.
My stock pick this week is Pfizer Inc. They are most well known as being one of the frontrunners in efforts to vaccinate the world against the Covid-19 virus and this has been in conjunction with BioNTech. Their most recent deal saw the Eurozone securing 1.8 billion doses through to 2023, which would generate revenue in excess of $21 billion but this is a low margin product for them. From an ethical perspective, generating excessive profits from a drug, in a pandemic, wouldn't bode well for the company's image.
First and foremost, they produce medicines and vaccines across a wide range of medical disciplines. These vary from cardiology to neurology and oncology to immunology. And this is where I think we should direct our interests. We've seen a remarkable uptick in sales of their oncology treatments, but Pfizer's CEO announced yesterday they’re currently in development of an at home treatment for Covid.
The antiviral drug is part of a class of medicines called protease inhibitors and it's most commonly used to treat other viral pathogens like HIV and Hepatitis C. It works by inhibiting an enzyme the virus requires to replicate. In essence, when first symptoms are experienced, the drug would be taken and look to stop the virus from replicating further so keeping the viral load low and the Covid symptoms to a minimum. We could possibly see this antiviral pill by the year end.
We've seen that not all the vaccines are 100% effective against the various strains. So, a treatment protocol would be the best alternative the pharma industry can offer at this stage. In Pfizer’s case, profit margins are higher than those on the vaccine. Trading around about 10% off its all-time highs and with the charts looking bullish, Pfizer is currently trading at a Forward P/E 11.7 times, which represents a discount to the industry average of 13.8.
It has dividend yield of just over 4% and recent trading action makes me believe that most of the disappointment and bad news has been priced in over the last quarter so any positive developments with this antiviral drugs could be a major catalyst and see Pfizer trading back above its all-time highs of $43 (R611.00), they are currently trading around $38.45 (R546.00) and we will be highly interested in their second quarter earnings report, which comes out on 4 May.
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