Remember when everyone thought Pfizer (PFE) was just a one-hit COVID wonder? Well, it looks like they're proving the naysayers wrong. Let's dive into this medical marvel, shall we?
Pfizer just dropped its Q2 results, and boy, did they deliver a shot in the arm to Wall Street expectations. Revenue hit $13.28 billion, beating estimates by 2.02%.
But the real showstopper? Earnings per share of $0.6, smashing expectations by a whopping 30.19%.
Now, I know what you're assuming: "Isn't Pfizer still riding that COVID wave?"
Well, excluding COVID-19 products, revenue growth was actually a healthy 14% year-over-year. It's like Pfizer's been hitting the gym, bulking up its non-COVID muscles.
Speaking of muscles, let's talk about those margins. The adjusted gross margin pumped up to 79% from 76%. That's a 300 basis point improvement.
But that’s not all. Recently, Pfizer hasn’t only been focused on flexing its financial muscles but also trimming the fat.
Their operating expenses only increased by 5% year-over-year. They're also on track to deliver at least $4 billion in net cost savings by the end of 2024.
Clearly, Pfizer's been pinching pennies harder than a Depression-era grandma.
Now, let's talk about Pfizer's pipeline – the real meat and potatoes here. In 2023 alone, they got FDA approvals for 9 new drugs. That's more approvals than a helicopter parent gives on prom night. And they're not stopping there.
By the end of 2024, they're expecting to launch 20 new products or indications. It's like they're running a drug development assembly line over there.
Notably, Pfizer's oncology segment is quickly growing. Sales hit almost $4 billion in Q2, and with the recent acquisition of Seagen, they're positioning themselves as the oncology powerhouse of the future.
We're talking about a potential market size of over $300 billion by 2030. That's enough zeros to make your head spin faster than a centrifuge.
And let's not forget about their market dominance. Prevnar 20 is ruling the pediatric segment with over 80% market share in the U.S.
But the real dark horse here is their foray into the obesity market. With their GLP-1 agonist in development, they're eyeing a piece of a market that's expected to hit $100 billion by 2030.
Next, let's get down to the nitty-gritty of R&D. Pfizer's been pouring money into research like it's watering a money tree.
They spent a whopping $11.4 billion on R&D in 2023, up 10% from the previous year. That's about 15.7% of their revenue – higher than the industry average of 13.4%.
But despite all this good news, Pfizer's stock is trading at just 11 times projected earnings. In fact, Wall Street analysts are giving modest EPS growth projections.
In my humble opinion, though, a fair valuation for Pfizer should be at least 15 times earnings. And with a dividend yield above 5.5% for the next few years, it's like getting paid to wait for the market to wake up and smell the antibiotics.
Of course, it's not all rainbows and unicorns in Pfizer-land.
They've got some patent expirations coming up that could hit sales harder than a heavyweight boxer. Between 2025 and 2030, they're facing potential losses on products that generated $17 billion in peak sales. That's a pill even Pfizer might have trouble swallowing.
And let's not forget about the elephant in the room – healthcare reform.
With politicians yakking about drug pricing like it's the latest reality TV drama, there's always a risk of regulatory headwinds. But Pfizer's diverse portfolio and global reach give it more shock absorbers than a monster truck.
So, what's the play here? Well, assuming Pfizer keeps managing costs like a coupon-clipping grandma, they could easily beat current forecasts by 10% or more by the end of 2024.
If the market finally recognizes Pfizer's potential and grants it a P/E ratio of 14x, we're looking at a price target of $43.4.
That's a 42% upside from the recent closing price – more juice than you'd get from a whole orchard of oranges.
So, here's the bottom line: Pfizer's current stock price is criminally undervalued. With its robust pipeline, improving margins, and commitment to dividends, I'm suggesting you buy this stock faster than you can say "take two and call me in the morning."
