Why Pfizer Stock is a sure-fire winner in 2022
Pharmonica giant Pfizer (NYSE: PFE) has been at the forefront of the industry, developing treatments for COVID since the start of the pandemic. While it’s unfortunate that the world continues to fight various strains of the virus, most recently the omicron variant, Pfizer’s products remain in high demand, which will likely increase its business results in 2022.
Below, we’ll put some numbers on how well Pfizer’s treatments have boosted its business this year and why 2022 could continue the trend, making it a sure-fire winning stock this year.
COVID treatments remain in high demand
It’s been about a year since the first COVID vaccines were made available in the United States, and the race is on to speed up production and distribution of doses. Several companies worked on vaccine development, but it became a two-company market. The vast majority of doses administered in the United States come from Pfizer and Modern, two companies that developed the vaccines using mRNA technology.
Image source: Getty Images.
Pfizer and Moderna have produced mRNA vaccines that use a genetic code from the virus to trigger the human body to produce an antibody response. It’s like the vaccine gives instructions to the immune system that say, “Hey, make these advanced proteins.”
Traditional vaccines use a weakened form of the whole virus that teaches the body how to defend itself against it. Essentially like how the body builds up immunity after a person gets chickenpox, but the weakened virus doesn’t actually make them sick. Both types of vaccines achieve a similar result, but drug companies can replicate the genetic code for production faster and more easily than the virus itself.
Demand for the vaccine has increased, mainly due to the ability of the virus to mutate into new variants. Pfizer’s vaccine originally provided for a two-dose treatment plan, but with the emergence of variants, many received a third injection (called a booster). Pfizer’s original forecast for 2021 called for 1.3 billion doses, but it ended up producing around 3 billion doses in 2021. Management now projects that Pfizer will produce around 4 billion doses in 2022.
A boon for Pfizer
It is a tragic and difficult time for the company as the pandemic continues, but Pfizer’s leadership position has created tremendous benefits for the company. First, the actual sales of his vaccine have been huge, contributing to a $ 36 billion in revenue expected until 2021. For reference, Pfizer generated $ 41.9 billion in revenue in 2020; that means the COVID vaccine has almost doubled Pfizer’s revenue!
In addition, it has paid off for Pfizer. The company’s profit margins before interest and taxes, known as the EBIT margin, have increased over the past year with the growth of the vaccines business. The company has also significantly increased its free movement of capital to over $ 29 billion in the past twelve months, up from $ 11.6 billion in 2020. More free cash flow makes a company more robust, giving Pfizer more money to invest in research and development. development of new products, pay more dividends or strengthen its balance sheet.
As the omicron variant spreads, it seems increasingly likely that COVID will not go away entirely in the immediate future. Pfizer recently developed an oral antiviral tablet to help treat early-stage COVID symptoms, which management estimates that 80 million courses of treatment could be produced by 2022. While today we are focusing on the next twelve months, Pfizer could potentially see business from its COVID treatments for several years to come.
The stock is still attractive
Investors have responded to Pfizer’s COVID success; the stock has risen 56% in the past year, a big step for a company with a whopping $ 329 billion market capitalization. Still, the market may not give Pfizer enough credit.
If we wanted to value a stock by the amount of free cash flow that investors receive per share, we could look at the performance of free cash flow; this percentage reflects the portion of the share price that we receive as free cash flow. We want as much free cash flow as possible for our money, because it pays dividends, funds new products, and generally creates shareholder value – it’s like the “lifeblood” of a business. Accounting or non-monetary items can impact earnings, so free cash flow can offer a new perspective on a stock’s valuation.
We can see above that increasing Pfizer’s free cash flow this year increased yield because free cash flow grew faster than the share price. Now that the stocks have started to move higher, the return is falling, but we’re still near multi-year highs, meaning the stock is giving you more bang for your buck than it has in most years. last ten years. In other words, it’s still cheap. While COVID remains firmly entrenched in our world, Pfizer remains poised for success in 2022.
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