Investors should always consider the long game when looking at stocks. Even if a business is not doing well right now, that doesn’t mean it’ll always be the case. Looking at a broader time frame can help you identify promising long-term buys.
One stock that is an intriguing one to consider is Pfizer (NYSE: PFE). These days, it hasn’t been a hot stock to own, not by any stretch. Investors are worried about its growth. Its recent results haven’t been impressive, and while the dividend offers a high yield, there may be concerns about it as well. The result has been a stock that’s been in deep trouble: in five years, Pfizer’s stock has declined by close to 30%.
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Below, I’ll look at where the business might be in the next three years, and whether it’s worth investing in the healthcare stock today.
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Over the next few years, Pfizer’s sales from some of its top drugs are likely to decline heavily as the company faces patent cliffs for Eliquis, Ibrance, Xtandi, Xeljanz, and other products. Previously, in 2022, CEO Albert Bourla projected that the company might lose up to $18 billion in revenue from 2025 through to 2030, as a result of competition from generics. But at the same time, Bourla has also been planning to more than offset that with increases to the top line via acquisitions and in-house development. At the time, he said he was planning to bolster the company’s top line by as much as $25 billion.
And in recent years, Pfizer has been busy with acquisitions to reach that goal. Its most high-profile purchase was the company’s $43 billion acquisition of Seagen in 2023, an oncology company that makes advanced cancer treatments. Last year, Pfizer also bought Metsera for up to $10 billion. Metsera is developing GLP-1 drugs, which could potentially make Pfizer a major player in the anti-obesity market.
The big question mark is what Pfizer’s financials might look like when all the dust settles from not just the patent cliffs but also all the wheeling and dealing it’s been doing in recent years, and whether it will come out ahead. There will be declines in revenue from leading products today, but new ones could also fill the void and potentially more than make up for any losses.
There isn’t a crystal ball to know for sure, and that’s why there is an element of risk when investing in Pfizer stock these days. But what’s encouraging is that the business has been prioritizing growth and making moves that it believes will advance its business in the future; it hasn’t simply been standing pat. It’s been aggressive.
And with the company generating a strong profit margin of more than 12% last year, its financials remain strong, and they could allow the business to continue pursuing more acquisitions and growth opportunities. I believe that, with over 100 drug candidates in its pipeline, Pfizer will be able to weather the storm, secure some approvals within the next three years, and have more promising growth potential down the road.
Investors have been bearish on Pfizer’s stock, and the old adage that investors don’t like uncertainty has certainly rung true in this case. But investing in Pfizer is what I’d consider a calculated risk, one worth taking. It’s severely discounted, trading at just nine times its expected future profits (based on analyst expectations).
The business is profitable today and is putting its money to good use to build a vast pipeline that could lead to significant future growth. As long as you’re willing to remain patient with the stock, I believe it can generate great returns for you in the years ahead.
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David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Pfizer. The Motley Fool has a disclosure policy.
