For some folks on Wall Street Pfizer (NYSE:PFE) may seem like the Rodney Dangerfield of stocks in todayâ€™s market. But on multiple fronts, itâ€™s PFE stock investors who should have the last laugh. Letâ€™s look at whatâ€™s happening off and on the price chart, then offer a risk-adjusted position in alignment with a better tomorrow and 2021.
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Itâ€™s been an interesting 2020 for drug giant Pfizer. Some of that of course has been a godsend. But in other ways and to steal a line from the late comedian, PFE has had little and even no respect from Wall Street.
Letâ€™s begin with the dissing of PFE stock.
This past summer shares of the blue-chip were ignominiously ousted from the Dow Jones Industrial Average. PFEâ€™s fault? The outfit was one of two pharma companyâ€™s in the bellwether, the other Merck (NYSE:MRK), and more pressingly, the lower-priced constituent. The Dow is a price-weighted index. And the undesirable combination put a target on Pfizerâ€™s shares as part of an index shake-up prompted by a 4:1 stock split in Apple (NASDAQ:AAPL).
The removal didnâ€™t do Pfizerâ€™s relative weakness any favors either. Shares were already underperforming in 2020. But in the decisionâ€™s wake index funds sold Pfizer stock to rejigger portfolios, causing an even larger performance spread to form between a trailing PFE stock and the blue-chip index. No respect, I tell you!
Now letâ€™s usher in the good for PFE.
Itâ€™s no secret 2020 has made a recognizable Pfizer brand into an even more prominent household name for its accomplishment the world over is thankful for. The company, in partnership with German-based BioNTech (NASDAQ:BNTX) became the first drug manufacturer to enter the market with a vaccine, BNT162b2, to combat Covid-19. The U.K. began the rollout in early December and the United States followed suit.
But respect has proven a scarce commodity in PFE stock.Â Despite the record-setting and critical Covid-19 breakthrough, investor cheer leading into the emergency use authorization or EUA of the vaccine was quickly greeted by an equally swift sell-the-news reaction.
Shares have tumbled nearly 17.5% since Pfizerâ€™s first shot was administered overseas on Dec. 8. Moreover, the dismissal from Wall Street has retraced a full two-thirds of PFEâ€™s rally off a broader market corrective hiccup in front of the U.S. election. R.I.P. Rodney.
Importantly though and for tomorrowâ€™s investors, Pfizer is so much more than just Covid-19. And maybe thatâ€™s even better news given worries nanoparticles in its vaccine could trigger rare allergic reactions and questions surrounding its efficacy against a new strain of the virus? Iâ€™ll let the reader decide.
Bottom line, Pfizerâ€™s drug capabilities beyond the coronavirus are impressive. The company expects a growth rate of 6% through 2025 for its core biopharma business. Whatâ€™s more, that excludes revenues generated from BNT162b2. And right now, those â€˜otherâ€™ sales of $42.4 billion and earnings of $2.38 forecast for the year yield a fairly attractive 5.4x revenue and 17x earnings multiple. Toss in a dividend of just over 4% and what more could an investor want?
Pfizer Stock Weekly Price Chart
Source: Charts by TradingView
What more could an investor want in todayâ€™s market? How about a Pfizer stock price chart whose shares are nearing critical technical support? Looking at the provided and well-detailed weekly view of PFE, multiple trend lines and key Fibonacci levels define an area from roughly $33.50 â€“ $36.50 as a strong opportunity to pick up a long stock position.
For a straight-up PFE position in shares, Iâ€™d like to see a weekly candlestick bottoming pattern confirmed alongside a flattening or ideally, bullish stochastics crossover. Approvingly though and for investors that use hedged stock positions for core holdings, the February $35/$40 collar with its defined risk and flexibility to adjust during the worst and best of times looks like a good spot to proceed with.
On the date of publication, Chris Tyler does not hold, Â directly or indirectly, positions in any securities mentioned in this article.
Chris Tyler is a former floor-based, derivatives market maker on the American and Pacific exchanges. The information offered is based on his professional experience but strictly intended for educational purposes only. Any use of this information is 100% Â the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CATÂ andÂ StockTwits.
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