Why Pfizer Stock Trounced the Market Today

Key Points

• Investors continued to be positive on the pharmaceutical giant following a deal reached with the government.

• Among other benefits, it will have a reprieve from potential tariffs on its industry.

• 10 stocks we like better than Pfizer ›

Still basking in the glow of a likely advantageous deal it signed with the government the previous day, Pfizer's (NYSE: PFE) stock was extremely healthy on Hump Day. That positive sentiment was boosted by a positive analyst take, to the point where Pfizer's share price rose by almost 7%. That was well above the 0.4% bump of the benchmark S&P 500 index.

A shot of good news

On Tuesday, Pfizer and President Donald Trump announced the company had signed an agreement under which the pharmaceutical giant will lower its prices for selected prescription drugs in the federal Medicaid program. Pfizer also committed to so-called "most favored nation" pricing (the lowest price on the global market) for the new drugs it'll launch in the U.S. market.

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Additionally, Pfizer will enjoy a grace period of three years from Trump's planned tariffs on pharmaceutical products if it builds assets in the U.S. The company has pledged to spend $70 billion on such activity. Investors took the news positively, not least because of the break from the potential levies.

A bull reiterates his buy rating

At least one analyst also had a bullish view on these developments. This was BMO Capital's Evan David Seigerman, who, that afternoon, in a new research note, reiterated his outperform (buy, in other words) recommendation on Pfizer stock. He also maintained his $30 per share price target.

According to reports, Seigerman's update was based on conversations with company executives. These revealed that the promised discounts would apply only to Medicaid and not its sister program, Medicare. He rated the deal highly and added that it would be quite beneficial to the company.

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Eric Volkman 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.