This Once-Dominant Healthcare Stock Down 50% Is Finally Ready for a Comeback

Key Points

• Pfizer’s earnings and stock price soared in early pandemic days thanks to its coronavirus treatment and vaccine.

• But waning demand for those products has put the company under pressure in recent years.

• 10 stocks we like better than Pfizer ›

A few years ago, Pfizer (NYSE: PFE) was on top of the world when it came to earnings and stock price performance. The pharma giant recorded a record of $100 billion in sales back in 2022, and saw its shares rise 60% over nearly two years through a peak in late 2021. This was in early pandemic times, as the company's coronavirus treatment and vaccine generated enormous levels of revenue.

But as demand for those products waned in the later stages of the health crisis, Pfizer saw revenue drop significantly. To make matters worse, the company approached the loss of exclusivity on other blockbuster products, which represented another headwind. As a result, Pfizer shares have slipped 50% over the past three years.

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This once-dominant healthcare stock is unlikely to remain in the doldrums forever, though, and it might finally be ready for a comeback. Let's find out why.

Image source: Getty Images.

Blockbuster coronavirus product revenue

First, it's important to note that Pfizer didn't uniquely rely on its coronavirus products for revenue, as it's a well-established pharma giant with a broad portfolio of products across treatment areas. But serving a pandemic, these products' revenue surged over a short period of time. For example, the coronavirus vaccine generated $37 billion in revenue, and the treatment earned $18 billion back in 2022. This is while other Pfizer blockbusters generated between $1 billion and $6 billion annually.

The coronavirus products added exceptional growth, but they also required a significant amount of investment -- and that's why a drop in demand led to declining revenue and prompted Pfizer to launch a cost realignment plan.

At the same time, Pfizer put the focus on refining its internal pipeline, only choosing to advance the most promising candidates and those with blockbuster or mega-blockbuster potential. The idea is to dedicate resources to a smaller, high-quality number of candidates, rather than diluting resources across too many projects.

Meanwhile, Pfizer also made an acquisition that's helping it toward its goal of becoming a top oncology player, and that was through the purchase of Seagen almost two years ago. Seagen's portfolio gave Pfizer four growing oncology drugs, as well as a portfolio of candidates.

One of the Seagen products, Padcev, combined with pembrolizumab (Keytruda), is the most prescribed first-line treatment for locally advanced/metastatic bladder cancer in the U.S. -- and the company aims to double the potential patient population by possibly expanding into another type of bladder cancer. Pfizer expects to report data supporting this later in the year.

Pfizer's catalysts this year

And speaking of data, Pfizer predicts as many as nine phase 3 readouts in the second half and several pivotal trial starts. The company also is waiting for at least four regulatory decisions in 2025.

So yes, it may be disappointing to see Pfizer's revenue on the decline today, and at a level of about $13 billion in the recent quarter. But the company is at a key transition point, and it's getting started along the upward trajectory. Pfizer is on track to deliver $4.5 billion in net cost savings by the end of this year, and by the end of 2027, it expects to reach $7.2 billion in total net cost savings. All this will help the company reinvest $500 million into research and development.

Any progress along the product development and cost savings route -- and we may see this regularly in the coming quarters -- could attract investors and fuel growth in Pfizer's stock price. This is one reason to get in on this stock now, ahead of these potential catalysts.

The other reason to buy Pfizer now has to do with valuation. The stock is trading for only 8x forward earnings estimates, down from more than 10x late last year. Both of these levels make great entry points, but today's level is particularly cheap -- especially considering the catalysts ahead and Pfizer's potential in the years to come.

This once-dominant healthcare company is on its way to becoming dominant again, and investors who get in today and hold on could score a big win over the long run.

Should you invest $1,000 in Pfizer right now?

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Adria Cimino 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.