This Dividend Stock Has Plunged Ahead of Trump’s Inauguration. Here Are 3 Reasons Investors Should Still Buy It.
The stock market has experienced significant shifts following Donald Trump’s election, as investors reposition their portfolios in anticipation of the new administration's policies. One sector that has been particularly affected is pharmaceuticals and healthcare, which was already facing downward pressure. This decline continued after President-elect Trump nominated Robert F. Kennedy, Jr. to lead the Department of Health and Human Services (HHS).
Kennedy, a known vaccine skeptic, triggered a market reaction that led to a selloff in vaccine manufacturers, including pharmaceutical giant Pfizer (NYSE: PFE). After falling 10% in 2022 and 41% in 2023, Pfizer ended 2024 with a 2% decline, trading around $26 per share. Given its multi-year low, many investors are questioning whether now is the right time to buy or sell Pfizer stock as Trump’s inauguration approaches. In this article, we’ll examine the reasons behind Pfizer’s price drop and why it may still be a compelling investment.
Why Is Pfizer Stock So Low?
1. Declining COVID-19-Related Sales
During the pandemic, Pfizer became a household name thanks to its COVID-19 vaccine and antiviral pill, Paxlovid. These products generated unprecedented revenue, pushing PFE stock to record highs. However, as the world moved past the pandemic, demand for these treatments plummeted. Consequently, Pfizer’s sales dropped, dragging its stock price down as well.
The company's once-booming COVID-19 portfolio is no longer a major revenue driver, and analysts expect continued declines in pandemic-related sales. Despite these challenges, Pfizer has been investing heavily in other therapeutic areas, particularly oncology, to diversify its revenue streams.
2. Pipeline Setbacks and Patent Expirations
Another factor weighing on Pfizer’s stock price is the mixed success of its drug pipeline. In December 2023, the company halted the development of danuglipron, its twice-daily oral weight-loss drug, due to adverse side effects. Given the explosive growth of the weight-loss drug market, particularly with GLP-1 receptor agonists from Novo Nordisk (NVO) and Eli Lilly (LLY), this was a significant setback for Pfizer.
Adding to investor concerns, several key Pfizer drug patents are set to expire within the next five years. Patent expirations mean increased competition from generic drugmakers, putting pressure on revenue and profit margins. The company must successfully launch new drugs to compensate for these upcoming revenue losses.
3. Seagen Acquisition and Increased Debt
Pfizer’s recent $43 billion acquisition of Seagen, a biotechnology firm specializing in cancer treatments, was met with skepticism from investors. The deal added substantial debt to Pfizer’s balance sheet, raising questions about the company’s ability to generate sufficient returns on this investment.
Despite the concerns, Seagen’s oncology treatments align well with Pfizer’s long-term strategy. If managed effectively, the acquisition could strengthen Pfizer’s position in the growing cancer treatment market and contribute significantly to future revenues.
Pfizer Stock Forecast
Wall Street analysts remain divided on Pfizer’s future. Out of 24 analysts covering PFE:
11 rate it as a “Strong Buy”
12 rate it as a “Hold”
1 rates it as a “Strong Sell”
The average price target for PFE is $31.33, representing a 19.5% upside from its recent trading price. Some bullish analysts have set a high-end target of $45, implying a potential gain of 71.6%.
Meanwhile, UBS remains cautious about pharmaceutical stocks ahead of Trump’s inauguration. The firm recently lowered its price target on Pfizer to $29 and described 2025 as a "transition year" for the company. UBS analysts believe uncertainty surrounding Trump’s healthcare policies could weigh on the sector in the near term.
3 Reasons to Buy Pfizer Stock Now
While PFE has struggled in recent years, several factors suggest that it remains a solid long-term investment. Here are three key reasons why investors should consider buying Pfizer stock despite its recent declines.
1. Expansion in Oncology and Seagen’s Growth Potential
Cancer treatments represent a lucrative and rapidly expanding segment of the pharmaceutical industry. With its Seagen acquisition, Pfizer is making a strong push into oncology, a strategic move that could pay off in the long run. The company expects Seagen to contribute $10 billion in risk-adjusted sales by the end of the decade.
Pfizer’s broader oncology portfolio already includes blockbuster drugs like Ibrance, Xtandi, and Lorbrena. These products, combined with Seagen’s cutting-edge antibody-drug conjugates (ADCs), position Pfizer as a leader in cancer therapeutics. If the company successfully executes its oncology strategy, it could unlock significant value for shareholders.
2. Attractive Valuation and Low Price-to-Earnings (P/E) Ratio
Pfizer currently trades at a P/E ratio of less than 10 based on forward earnings. This valuation is significantly lower than the broader pharmaceutical industry average, making Pfizer an attractive option for value investors.
Although earnings are expected to decline in the short term, analysts anticipate a recovery in the coming years. If Pfizer can stabilize its revenues through new product launches and cost-cutting initiatives, its stock price could rebound significantly.
3. High Dividend Yield and Reliable Payouts
For income-focused investors, Pfizer’s dividend yield of over 6.5% is a compelling reason to hold the stock. The company has a strong history of paying dividends and has consistently returned capital to shareholders through dividend payouts and share buybacks.
Despite recent struggles, Pfizer’s cash flows remain healthy enough to sustain its dividend payments. In a volatile market environment, high-yield dividend stocks like Pfizer provide investors with a steady stream of passive income, helping to offset stock price fluctuations.
Conclusion: Should You Buy Pfizer Stock?
Pfizer faces several near-term challenges, including declining COVID-19-related sales, patent expirations, and debt from the Seagen acquisition. However, its focus on oncology, attractive valuation, and strong dividend yield make it a compelling long-term investment.
While investors should brace for potential volatility, those with a long-term perspective may find Pfizer to be a worthwhile addition to their portfolios. The stock’s current low valuation, combined with a promising oncology pipeline and a robust dividend, make it a solid pick for both growth and income investors.
As with any investment, it’s important to conduct your own research and consider your risk tolerance before making a decision. While Pfizer may not be a short-term winner, its long-term prospects remain promising for patient investors willing to ride out near-term uncertainty.
Disclaimer: The information provided in this article is for informational purposes only and should not be considered financial advice. Investors should conduct their own due diligence before making any investment decisions.
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