Pfizer Isn't Expecting to Make Any Big Acquisition in the Next Couple of Years, but It's Planning to Do This Instead

Acquisitions can be a double-edged sword for companies, as they can quickly bolster revenue and growth opportunities but also add costs and inefficiencies. Healthcare giant Pfizer (NYSE: PFE) has been involved in numerous acquisitions in recent years as it has worked to strengthen its prospects; a major risk for the stock has been uncertainty about where its growth will come from, particularly as it faces patent cliffs on key drugs.

One of the largest deals Pfizer made was the $43 billion acquisition of oncology company Seagen in 2023. It was a major acquisition that gave it some promising cancer-fighting medicines. But Pfizer isn't expecting to make significant deals like this in the near future. Here's how it plans to adjust its strategy and what that could mean for investors.

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Pfizer looks to take a break from acquisitions

When a company is aggressively pursuing acquisitions, it can make it difficult to avoid rising costs, as it may incur acquisition-related expenses and become bloated with additional workers and overhead.

On Pfizer's most recent earnings call, CEO Albert Bourla was asked if there would be any more significant acquisitions in the near future. Bourla indicated that nothing's on the horizon and that the healthcare company will instead focus on enhancing its different businesses with artificial intelligence (AI).

"We think that right now, in the next two years, it is the time to execute on AI transformation of these organizations. That requires not the disruption of a mega merger."

Bourla sees tremendous potential with AI to develop new medicines more quickly. Not only could this accelerate the company's long-term growth, but it may also yield greater cost savings and efficiency, leading to stronger financial results.

Does this news make Pfizer's stock a better buy?

Slowing down its acquisition strategy could be an advantageous move for Pfizer, particularly as it works to use AI to improve its processes. If these AI transformations result in stronger earnings and long-term growth prospects, it's what the stock may need to get out of its funk; shares of Pizer are down 35% in the past five years, as even a low valuation hasn't been enough of a reason to entice investors to buy the stock.

The good news, however, is that the company appears to be moving in the right direction, growing its business and looking for ways to enhance its operations with the help of AI. At less than nine times its estimated future earnings (based on analyst expectations), the stock is deeply discounted and offers investors an excellent margin of safety. Plus, it offers a tremendously high dividend yield of around 6.8%. There may be some uncertainty ahead, but overall, Pfizer may be one of the better bargains in the market right now.

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.