Pfizer Stock Up 11% in December – Time to Buy PFE Stock?

The price of Pfizer stock is up 11% so far this month as the firm secured emergency-use approval from the US Food and Drug Administration (FDA) for its COVID pill named PAXLOVID™, which has demonstrated a high level of efficacy against the omicron variant.

On 14 December, the White House informed that booster shots of Comirnaty – the name of the vaccine produced by Pfizer – were effective against the new variant of the virus. Shares surged nearly 6% on the day that the announcement was made.

On that same day, Pfizer informed that PAXLOVID™ showed a reduction in the risk of hospitalization and death caused by the omicron variant of COVID-19 by as much as 89% if the pill was administered within the first 3 days after the symptoms were first identified and 88% if it was administered within the first 5 days.

More than 2,246 adults participated in the study called EPIC-HR and the data obtained from this trial was used to apply for emergency-use approval for the treatment with the US Food and Drug Administration (FDA).

Meanwhile, Pfizer informed yesterday that the FDA approved PAXLOVID™ to be used on high-risk adults and high-risk pediatric patients who are 12 years of age or older and whose weight exceeds 40 kilograms.

The company expects to produce 120 million courses of PAXLOVID™ in 2022 and it has already secured multiple contracts to supply the drug to various countries including 2.75 million doses purchased by the United Kingdom and 10 million bought by the United States federal government.

What could be expected from this healthcare stock in light of all these positive developments? In this article, I’ll be assessing the price action and fundamentals of Pfizer stock to outline plausible scenarios for the future.

67% of all retail investor accounts lose money when trading CFDs with this provider.

Pfizer Stock – Technical Analysis

The price of Pfizer stock has broken above the upper trend line shown in the chart and has widened its distance with both its short-term and mid-term simple moving averages as a result of the latest positive momentum that the stock has been experiencing.

The $59 short-term target I set forth in my previous article about Pfizer was already hit and now it might be time for the rally to take a short break as technical readings seem quite overheated.

In this regard, the price of PFE stock is currently standing 20% above its 50-day simple moving average and almost 38% above its 200-day SMA. The farthest the price gets from these markers, the higher the risk of a sharp correction.

Meanwhile, trading volumes have been quite elevated lately and have exceeded the 10-day average on multiple occasions including the 17 December session during which over 100 million shares exchanged hands. On that day, the price declined by almost 3%.

Momentum indicators including the Relative Strength Index (RSI) have made higher highs lately and this increases the risk of a correction as well as the market may have gotten ahead of itself already. The MACD is also standing at its highest level in at least 7 years.

Moving forward, there are multiple areas of support that could cushion a short-term decline in Pfizer stock. First, we have two trend line supports found at $56 and $54 and after that there is a strong area of support at $50 where a horizontal support and the 50-day SMA converge.

The outlook for Pfizer in the mid-term continues to be bullish but, in the near-term, downside risks seem high as the latest rally may have already reached a phase of exhaustion.

Pfizer Stock – Fundamental Analysis

The United States contract with Pfizer to purchase 10 million courses of PAXLOVID™ has a price tag of $530 per course. Even though this is just a referential price, it can be used as a baseline to estimate the impact that the treatment’s sales could have on Pfizer’s top-line performance.

Based on Pfizer’s estimated manufacturing capacity of 120 million doses, the company could produce over $60 billion in revenues next year from PAXLOVID™ alone.

Meanwhile, the demand for booster shots of Comirnaty may keep COVID vaccine sales at elevated levels next year. Comirnaty sales are expected to end this year at $36 billion while sales excluding this treatment could end 2021 at $46 billion.

Even if we estimate that vaccine sales will be cut in half next year, Pfizer’s top-line results could land somewhere near or above the $100 billion including sales of PAXLOVID™ at that estimated price of $530 per course.

That would result in a 25%+ increase in Pfizer’s sales compared to this year’s estimates and could propel the firm’s earnings to a range between $5 to $6 per share. As a result, at the current price of $59.6 per share, Pfizer is trading at around 10x to 12x its forecasted earnings for next year.

This is quite a conservative multiple for a company that is experiencing a strong boost to its finances from many perspectives – i.e. higher sales, profitability, and cash flows.

Overall, the rally for Pfizer might just be starting and, as more data regarding the impact of PAXLOVID™ in the firm’s financial performance comes in, chances are that the latest positive momentum will accelerate significantly.

With this in mind, a more optimistic long-term price target for the firm could be set at $100 – $120 for 2022 if trading multiples expand as a result of a significant improvement in the firm’s fundamentals.

Buy PFE Stock at eToro with 0% Commission Now!