Pfizer Inc. (NYSE:PFE) is up 11.4% year-to-date and leads to a classic value-versus-risk setup. The stock’s forward price-to-earnings multiple appears attractive, along with its healthy operating margin, and strong cash flow generation capacity. However, revenue growth remains sluggish, and the company’s thin bottom-line margin and low return on equity add to investor concerns. It explains Pfizer’s recent underperformance compared to the broader market.
The last 6 months have seen the stock gaining close to 1%, compared to a 33.88% for Insider Monkey Billionaire Index and 18.18% for S&P 500 ETF (SPY). Pfizer was ranked #5 in our recent list of 10 Best US Stocks to Buy Under $50. So which other stocks ranked higher?
Time to Go Short on Pfizer (PFE)?
Looming Patent Expiration Threat
Pfizer was trading at $27.73 right before the October 8 evening. The stock is up close to 11.50% on year-to-date basis, though its 10.94% gain over the last 52 weeks lags the S&P 500’s 15.84%. With a $160.62 billion market capitalization, investors have witnessed a recovery but in line with the broader market.
Upcoming patent expirations during the next 2 to 3 years pose a threat to Pfizer’s competitive standing. In fact, many of the key topline drivers such as Ibrance, Eliquis, Xeljanz, Prevnar 13, and Xtandi face significant U.S. patent expirations in 2026–2027, although exclusivity timelines vary by product and market.
The valuation story is highly compelling, with a striking divergence between trailing and forward P/E multiple. With a 37.08x trailing multiple, the stock appears expensive. However, a sharp drop to a forward multiple of 9.67x creates a lot of appeal. The market has projected earnings growth to accelerate, as one-time charges and the post-COVID revenue decline fall out of the comparison. Whether Pfizer’s steep discount makes it attractive enough to rank among the 10 best healthcare stocks to buy according to hedge funds is worth a closer look.
Attractive Multiple, Unattractive Margins
Pfizer’s 29.58% operating margin over the trailing twelve months shows the core operations remain highly profitable. However, a net margin of just 6.80% and 5.01% return on equity paint a different picture. These point to rising interest costs, acquisition-related charges, and other items consuming much of that operating gains.
The company is also dealing with lower drug prices within the domestic market. However, international revenue growth is helping offset domestic pricing pressures. The recently reported second quarter saw a 3% jump in international revenues, which came in at $6.18 billion. This accounts for more than 41% of the company’s total revenue base.
Even in fiscal 2025, the company generated more than $25 billion in international sales, with products such as Vyndaqel and Prevnar showing a lot of promise across the foreign markets. Investors would also be curious to know if this large-cap global healthcare and medical technology is a dividend bargain following its 2026 selloff?
Institutional Sentiment
Data tracked across 1,000+ hedge funds by Insider Monkey reveals significant interest from smart money managers in Pfizer. As per 13F filing data for Q2 2026, a total of 83 hedge funds held positions in the stock, same as the first quarter.
As per Yahoo Finance database, Blackrock is the largest institutional investor with 529.67 million shares, representing 9.29% of outstanding shares. Other notable institutional names include Vanguard Capital Management and State Street Corporation that hold 6.53% and 5.39% of outstanding shares, respectively.
The Earnings Recovery Everyone Is Betting On
Overall sentiment around Pfizer remains cautious rather than negative, as the stock carries a modest short interest of 2.72%. This indicates limited amount of active skepticism across the investor base. The stock’s lucrativeness rests on whether the earnings recovery incorporated within its forward multiple actually materializes or not. Pfizer’s forward P/E of approximately 9.7x could offer upside if earnings recover as expected. However, upcoming patent expirations and weak profitability suggest the discount may be justified unless Pfizer demonstrates sustainable earnings growth.
While we acknowledge the risk and potential of PFE as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than PFE and that has 10,000% upside potential, check out our report about this cheapest AI stock.
READ NEXT: Salesforce (CRM) Trails the Market in 2026: What Could Fuel a Re-Rating? and Visa (V) Turns Scale Into Best-in-Class Margins. Here Is What Investors Need to Know.
Hedge Fund Resource Center