The stock market is at record levels these days, but one company that isn’t reflecting that optimism is Pfizer (PFE -0.68%). Shares of the pharma giant are down 28% over the past 12 months as investors grow concerned about its long-term growth prospects.
The company is in the midst of a transition as it pivots to new growth opportunities. And investors aren’t always patient when it comes to turnaround stories, especially when there’s a good deal of uncertainty as to how the business will emerge on the other side.
If you’re a long-term investor, however, now may be a great time to consider Pfizer’s stock. At a lower price point and growth potentially on the horizon again, could this be a stock that helps you become a millionaire?
Pfizer has been investing in growth
One thing I’ve liked about Pfizer’s strategy is that as it has been generating billions thanks to its COVID-19 vaccine, it has been putting that money to work. The drugmaker has been acquiring businesses and making investments that should set it up for future growth down the road. It wasn’t hoping for the revenue to continue flowing in from its COVID products forever; rather, it was preparing for the next phase of its growth. That’s a great sign of a growth-oriented business.
While Pfizer has been involved with several deals, the largest has been its $43 billion acquisition of cancer company Seagen. That acquisition will play a key part in growing its oncology business. Pfizer estimates Seagen could contribute $10 billion to its top line by 2030.
Other acquisitions the company has closed within the past few years include Biohaven Pharmaceuticals, Global Blood Therapeutics, ReViral, and Arena Pharmaceuticals. By 2030, Pfizer plans to add up to $25 billion in revenue to its business through a combination of acquisitions and its pipeline.
This is as the company also faces a possible $18 billion loss in revenue due to generics after some of its key drugs (e.g., Eliquis, Vyndaqel, Ibrance, and others) lose patent protection in the years ahead.
The low valuation could make it an underrated investment
Pfizer’s stock is trading within just a few dollars of its 52-week low. Based on analyst estimates, it’s also changing hands a fairly modest 13 times its expected future profits. By comparison, the average healthcare stock trades at a multiple of 19. And in terms of book value, Pfizer’s at a price-to-book multiple of just 1.8.
The benefit for investors who buy the healthcare stock today is that it comes cheap. And while Pfizer’s business faces a tough road ahead, the company isn’t in a dire situation. Patent expirations and developing new drugs and focusing on acquisitions is par for the course when it comes to big pharma companies; patents don’t last forever.
Companies need to adapt, and Pfizer is doing just that. It will, however, take some time for the business to get back to growing. This year, Pfizer expects revenue to come in within a range of $58.5 billion to $61.5 billion, which would imply little to no growth from the $58.5 billion in revenue it reported for 2023.
Can investing in Pfizer really make you a millionaire?
If you had invested $10,000 into Pfizer, you would need the stock to be a 100-bagger for it to make you a millionaire. At $25,000, it would need to deliver a more modest 40x return. But for Pfizer to become a 40-bagger, you would need to assume the company will one day have a $6.4 trillion market value. No healthcare stock is even at $1 trillion today.
Hoping that Pfizer can get to such a high valuation, even over multiple decades, could be a bit of an overoptimistic outlook for the stock. Consider that in the past 10 years, shares have actually declined by more than 9%.
Despite its focus on long-term growth, Pfizer isn’t a stock that’s likely to make you a millionaire. While it can still be a good investment given its more modest valuation, investors shouldn’t set their expectations too high considering the challenges that lay ahead for Pfizer.
David Jagielski 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.
