Risk/Reward Rating: Positive

Pfizer, in partnership with BioNTech, has brought the best COVID vaccine to market this year. The vaccine is expected to bring in an incredible $26 billion of revenue to Pfizer in 2021 leading to an annual revenue growth rate of 71% versus 2020. The current valuation of Pfizer shares reflects low expectations for the company’s future.

Valuation: 11x 2021 earnings estimates and 13x 2022 estimates. Excluding the COVID vaccine business entirely, Pfizer is trading at 15x earnings estimates for 2021 and 4.9x sales.

This valuation is a fraction of the valuation of the major stock market averages. The major indices are trading between 23x and 32x non-GAAP earnings estimates (GAAP: generally accepted accounting principles). Additionally, Pfizer pays a 4% dividend yield at the current price dwarfing the income provided by the major market averages which range from 0.7% to 1.35%. The dividend yield also handily tops the yield available from much of the bond market.

The low valuation reflects a valid concern that the COVID vaccine will be a short-lived revenue stream which is likely to contract once the global vaccination occurs. This concern seems overblown here as COVID and its variants are likely to persist into the foreseeable future, requiring both initial vaccination and regular boosters to deal with mutations and maintain global immunity.

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