As Pfizer Faces a Period of Volatility, Here’s My Plan for the Shares

The numbers for Pfizer (PFE) are excellent. The guidance? Meh. Pfizer released the firm’s first quarter financial performance on Tuesday morning.

Pfizer posted adjusted EPS of $1.62 (GAAP EPS of $1.37) on revenue of $25.7B. These numbers beat expectations for both the top and bottom lines, while the sales print was good enough for year over year growth of 77% and operational growth of 82%. Ex-the contributions of Covid mRNA vaccine Comirnaty and Covid treatment tablet Paxlovid, operational growth falls to 2%. Net Income increased 61% to $7.864B. Direct sales and alliance revenues tied to Comirnaty amounted to $13.23B, up 282.3% from Q1 2021.

Business Units

Vaccines revenue (includes Comirnaty) increased 205.3% (not comparable) to $14.941B.

Hospital revenue (includes Paxlovid) increased 69% to $3.191B.

Oncology (including Ibrance) revenue increased 4% to $2.967B

Internal Medicine (including Eliguis) revenue decreased 6% to $2.44B

Rare Disease revenue increased 17% to $963M.

Inflammation & Immunology (including Xeljanz) revenue decreased 23% to $821M.

Pfizer CenterOne revenue decreased 13% to $338M.

The CEO

Chairman and CEO Albert Bourla made comment in the press release regarding Pfizer’s now two most famous offerings, as well as the firm’s place in the world… “We continue to supply the world with Comirnaty, which remains a critical tool for helping patients and societies avoid the worst impacts of the Covid-19 pandemic, and we are on track to fulfill our commitment to deliver at least 2 billion doses to low and middle income countries in 2021 and 2022, including at least 1 billion doses this year. In addition, we are delivering on our production commitments for Paxlovid, which is already having a profound impact on the lives of patients.”

Bourla adds comment on the war in Europe… “In response to the devastating war in Ukraine, and as a company that is dedicated to promoting human health, we have chosen to continue to supply the people of Russia with the medications they need, and are donating all profits from our Russian subsidiary to humanitarian efforts in Ukraine.”

Outlook

Pfizer reaffirmed full year 2022 revenue guidance of $98B to $102B including approximately $2B worth of negative foreign exchange impacts. While the company has stuck to this guidance, Wall Street was up around $107B for this number. Pfizer has also reaffirmed full year revenue guidance of $32B for Corminaty including a $1B negative foreign exchange impact. Pfizer also reaffirmed full year 2022 revenue guidance of $22B for Paxlovid including a $500M negative foreign exchange impact. This despite disappointing late stage data regarding transmission taken from a clinical study involving 3K adults living with household contacts already infected with SARS-CoV-2.

The firm also took its full year outlook for adjusted EPS down to $6.25 to $6.45 from previous guidance of $6.35 to $6.55, and versus Wall Street’s consensus view of about $7.15.

My Thoughts

Pfizer was first to a Covid vaccine by virtue of their German partner BioNTech (BNTX) . The vaccine remains arguably the best, and almost certainly the most available defense against severe disease and hospitalization associated with the SARS-CoV-2 coronavirus. For how long the original vaccines retain some level of effectiveness against the still mutating virus and for how long protection persists after being vaccinated or receiving a booster shot are question marks. There will have to be an adjustment made to this vaccine and others at some point.

As for Paxlovid, the only three people I know who took the drug after being infected thought it helped. Though Paxlovid disappointed in the way of preventing infection, it does appear (at least from here), to help once infected. Paxlovid sells for about 25% less than Molnupiravir, which is the rival anti-viral developed by Merck (MRK) . That could help with sales.

The stock is borderline “oversold”, as the Full Stochastics Oscillator appears to be in far more dire straits than does Relative Strength. Readers will see while the stock appears to have found some support at a rough 50% retracement of the February 2021 low through December 2021 high, the more important technical development in my opinion is the convergence of the lower upward reaching trendline (Feb 2021 – present), and the upper, downward sloping trendline (December 2021 – present).

This signals to me a coming period of volatility. That would be interesting because PFE runs with a Beta of just 0.76. I remain long this stock. I bought it in agony when I was suffering from a somewhat severe case of Covid in early 2020, followed by a very long and very nasty bout with Long Covid that lasted well into 2021. I have remained long ever since. So, I am still up more than 40% on this one despite the stock giving up more than 22% since December. I do not plan to sell it now. Pfizer does pay shareholders $1.60 per year (yielding 3.34%) just to stick around.

My Current Plan

– Target Price: $61 (old high)

– Pivot: $49 (200 day SMA)

– Add: $45 (2022 low)

– Panic: $43 (break of 2022 low)