Don’t Expect Much From Pfizer At Least In The Short-Term

Through this year, the company has maintained profitability with margins of 18.46%. Net revenue has been $48.20 billion, and total cash on hand is $30.27 billion. Operating cash flow has been $14.6 billion. Investors have remained loyal, believing Pfizer can regain its footing and chart positive growth. Zacks has rated PFE as a stock to hold. The Wall Street Journal reports a general analyst consensus of overweight for Pfizer, indicating a stock price target of $39.00 from its current $31.37. Doubtlessly, the overweight recommendation has been aided by the fact that Pfizer has generously and steadily increased its dividend year over year. In fact, Pfizer just declared a $0.28 quarterly dividend equating to a 3.3% annual yield. Compared to other pharmaceutical stocks, Pfizer’s yield is among the highest. For those seeking low-risk and income-producing -term investments, PFE may be one to buy and hold.

With a healthy cash flow, Pfizer is a relatively safe bet for a modest return on investment. Investors with higher risk tolerance and seeking higher rewards may want to consider other options. The dividends for Pfizer have steadily risen for the past seven years, but they were fueled by a record number of patent blockbusters. Presently, Pfizer is dealing with a heretofore unprecedented loss of patent exclusivity and no indication that these moneymakers will be replaced anytime soon. Only a handful of new therapies are touted in Pfizer’s pipeline as of 2014. (Hence, their bid to take over AstraZeneca.)

Although Pfizer is a steady income-producing stock, it is unlikely to be a high-flyer. If you are a more aggressive, capital appreciation seeking investor, I wouldn’t recommend buying PFE at this time. If you are conservative and like predictable yields, then PFE isn’t such a bad choice.  For more aggressive investment with growth in this sector, you may want to look towards competitor companies who have higher immediate earning potential as the field is crowded with viable challengers with stronger pipelines. More delineation is needed on Pfizer’s strategy for long-term growth, aside from M&A. In the interim, PFE is more “bond-like” than “stock-like” with a relatively stable income stream but not much driving underlying appreciation in the stock price.

Disclosure: The author of the article has no position in PFE or the other securities mentioned.