PFE - Buy The Dip or Follow The Trend?When I began research for this post I expected to be giving the bull case for Pfizer. It's the type of stock I like - a household name oozing with quality and prestige, a strong moat, beaten up with strongly bearish sentiment with multiple factors pointing towards recovery, with short term technical support and long term positive fundamental outlook.
I like to play the contrarian in the stock market and it often pays well. So what about Pfizer?
Well, technically it's RSI oversold (or was on Thursday, before a small bump Friday) on virtually every timeframe from the 1 hour right through to the Weekly.
Looking at Measured Moves, something I do regularly, it's down 19 points from it's swing high on Dec 14th 2022, exactly the same as big upswing from Feb 25th to Aug 18th 2021, and just short of the Oct 13th to Dec 20th 2021 swing of 21 points.
Note that these 3 swings mentioned are the largest swings in Pfizer history, due to the growth and subsequent crash caused by COVID and the following recovery.
We also have the potential for an area of support here, with the area around 36 having seen both support and resistance on a regular basis since 2016, and if we zoom out a year or 2 and look at Volume Profile, depending on where your set your Visible Range you're going to see the point of control landing between 34.5 - 36. Either the current price or just below.
So what's the problem?
There are a few.
"Patent Cliffs" are always an issue for pharmaceutical companies, where after 20 years their patents expire and they have to face competition from generic brands entering the space.
Five of Pfizer’s products face patent expiration in the next six years — Eliquis, an anticoagulant medication, Ibrance to treat breast cancer, Xeljanz for arthritis, Xtandi for prostate cancer, and Vyndaqel for transthyretin amyloid cardiomyopathy. Excluding Pfizer's COVID sales, these 5 products respresent 40% of the company's sales.
Just this week, William Pao, Pfizer’s chief development officer raised concerns about antitrust regulators cracking down on Mergers and Acquisitions, notably with the blockage of Amgen's $28billion takeover of Horizon.
This raises questions about Pfizer's proposed $43billion purchase of Seagen, and whether they too will come under regulator scrutiny.
Financially, Pfizer's revenue is expected to meaningfully decline in 2023, mainly due to a drop in COVID-19 related sales. Analysts estimate the revenue to be around $68.1B, a 32% YoY decrease.
Pfizer's adjusted EPS for FY23 is expected to be $3.37, down 49% YoY, according to Wall Street estimates.
This is a company that since 2000 has traded as low as 12 in 2008, to as high as 61 at the peak of the COVID drug mania. While technically we do look likely to see a relief rally in the near term, this isn't a company I want to be exposed to. There is too much uncertainty, and while it may look cheap on the scale of the last few years, we must bear in mind that those years were drastically inflated due to COVID drugs that are no longer relevent to it's financials. Pfizer is coming back down to earth with a thud, and I think the company belongs in the 27-36 price range until we see more clarity on it's Seagen purchase and how much it's revenues are pilfered by competing generics.
No play for me right now on Pfizer. This is the reality of stock analysis - you go down the rabbit hole, and ultimately most stocks are neither a buy or a sell. Just a "wait and see".
