3 Reasons to Buy Pfizer Stock Like There's No Tomorrow

The pharmaceutical industry can be a tough business. Companies must innovate constantly to stay relevant because patents protecting their proprietary drugs expire. Pfizer (NYSE: PFE), a longtime stalwart in the pharmaceutical sector, enjoyed a growth spurt during the COVID-19 pandemic due to its Comirnaty vaccine and Paxlovid treatment.

Sales and earnings have plunged since the pandemic ended, sending Pfizer stock down over 50% off its former high.

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Ironically, the best time to invest in cyclical companies like Pfizer is during these valleys, just before the next growth spurt. Although Pfizer seems headed toward big things over the coming years, the stock has immediate appeal. Here are three reasons to consider buying Pfizer like there's no tomorrow -- today.

1. The business is trending up again

As terrible as COVID-19 was for society, it was undeniably a windfall for Pfizer. The company's two COVID-19 products combined for approximately $56.7 billion in sales in 2022, ballooning its total revenue to $100.3 billion. Naturally, as the pandemic opportunity dried up, it seemed like Pfizer was imploding. You can see sales and earnings spike and then crash in the chart below:

PFE data by YCharts

More importantly, revenue and earnings bottomed and began rising again this year. This isn't a fluke; through nine months of 2024, Pfizer's specialty care products are up 11% year over year, while oncology sales are up 25%. Comirnaty sales (reported in Pfizer's primary care portfolio) are down 66% through nine months of 2024 versus last year, but the number is small enough now that it's not dragging the company down.

Pfizer is focusing on oncology for growth for the rest of the decade. In late 2023, it used its pandemic profits to acquire Seagen for $43 billion to beef up its oncology pipeline. The strategy seems to be working so far. Management is predicting earnings growth between 10% and 18% for 2025, and analysts estimate earnings will grow by an average of 14% annually over the next three to five years.

In other words, Pfizer looks ready to grow again.

2. A massive dividend with strong financial backing

Investors don't have to buy and hope they eventually make money. Pfizer is generously compensating its shareholders for their patience with a dividend that yields 6.3% at today's share price.

That's higher than most blue chip stocks, which might raise alarm bells about the dividend's dependability. However, the facts don't support that. Management has repeatedly maintained its plans to support (and raise) the dividend and followed through with a 2.4% increase in early December.

It's not a big increase, but Pfizer is focusing on paying down debt, so once the balance sheet is healthy again, I'd look for more dividend growth. Financially, the dividend is fine. The payout ratio is only 67% of guided 2025 earnings, so this wasn't a desperate raise -- Pfizer can afford it.

3. Potential market-beating returns from Pfizer's current price

You might expect a hefty dividend and double-digit earnings growth to fetch a solid valuation on the stock market, but nope. Pfizer trades at just over 10 times its 2025 earnings guidance. Why? It's probably a combination of several factors. Pfizer may still have a stigma from its post-pandemic falloff. Additionally, investors may fear how a new government administration could impact Pfizer and the broader pharmaceutical industry.

The good news is that you don't need the valuation to change to make good money from Pfizer stock. The stock could remain at its current price-to-earnings ratio and still deliver 20% annualized returns, enough to double your investment in under four years. That's 6% from the dividend plus another 14% from earnings growth.

Meanwhile, the S&P 500 trades above its historical norms, leading some to speculate about potential market downturns. I'd say the odds are that Pfizer stock will outperform the broader stock market over the coming years, assuming its oncology growth agenda goes as planned. So far, so good, with a strong growth guide for 2025.

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Justin Pope 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.