Dow component Pfizer Inc. (PFE) is trading near a four-month low on Wednesday, continuing to lose ground despite a 25% haircut since posting an all-time high at 61.71 in December. The selloff has coincided with an even larger Moderna Inc. (MRNA) decline, driven by crashing infection numbers and the emergence of protein-based vaccines that are better suited to worldwide distribution because they don’t require storage at low temperatures.
Paxlovid Profit Potential
Even so, Pfizer investors are well-positioned due to the rollout of the Paxlovid anti-viral drug, which should become the treatment of choice in the Western world in coming months. On Tuesday, the Biden administration announced the drug will be free for Americans if they test positive at a local pharmacy. The program is now being rolled out at hundreds of sites, including pharmacy departments at Kroger Company (KR), CVS Health Corp. (CVS) and Walgreen-Boots Alliance Inc. (WBA) Inc.
Jefferies just sounded the alarm about protein based vaccines and their impact on PFE profits, with strategist Will Sevush cautioning “This is bad for mRNA. This is bad for Pfizer”. Analyst Peter Welford was more nuanced, warning that “it is feasible that some patients may prefer to opt for a protein-based vaccine as a booster shot if one is available. In the developing world, where there are still large unvaccinated populations, the ability to store protein-based vaccines at normal refrigerator temperatures could facilitate distribution.”
Wall Street consensus has cooled in recent months, now standing at an ‘Overweight’ rating based upon 11 ‘Buy’, 14 ‘Hold’, and 0 ‘Sell’ recommendations. Price targets currently range from a low of $49 to a Street-high $78 while the stock is set to open Wednesday’s session about $3 below the low target and $11 below the $57 median target. This dismal placement highlights analyst confusion about the direction of Pfizer profits in the post-pandemic world.
Wall Street and Technical Outlook
Pfizer completed a cup and handle breakout above 22-year resistance in the mid-40s in November 2021, lifting to an all-time high in December. The subsequent decline has now returned to breakout support, which has narrowly aligned with the 200-day moving average and .786 Fibonacci rally retracement level. Ukraine-induced volatility could delay buying interest but long-term term relative strength readings are rapidly approaching oversold levels, raising odds the stock will eventually bottom around this price zone.
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Disclosure: the author held no positions in aforementioned securities at the time of publication.