Should You Own Pfizer Stock?

With shares of Pfizer (NYSE:PFE) trading around $28.72, is PFE an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Pfizer is a biopharmaceutical company that discovers, develops, manufactures, and sells medicines for people and animals worldwide. The company manages its operations through five segments: Primary Care; Specialty Care and Oncology; Established Products and Emerging Markets; Animal Health and Consumer Healthcare, and Nutrition. Pfizer’s main products include human and animal biologic and small molecule medicines and vaccines, nutritional products, consumer healthcare products, and products for the prevention and treatment of diseases in livestock and companion animals. Illness and disease is something that plagues people and animals around the world. Pfizer is in constant battle trying to improve its products in order to help people and animal struggling around the world. So long as health is a main concern for people and animals, Pfizer stands to see significant profits for years to come.

T = Technicals on the Stock Chart are Mixed

Pfizer stock has seen an explosive move higher over the last several years. The stock has reversed its long-term trend from down to up and sees no signs of slowing. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Pfizer is trading around its rising key averages which signal neutral price action in the near-term.

PFE

(Source: Thinkorswim)

Taking a look at the implied volatility (red) and implied volatility skew levels of Pfizer options may help determine if investors are bullish, neutral, or bearish.

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Implied Volatility (IV)

30-Day IV Percentile

90-Day IV Percentile

Pfizer Options

18.76%

10%

11%

What does this mean? This means that investors or traders are buying a small amount of call and put options contracts, as compared to the last 30 and 90 trading days.

Put IV Skew

Call IV Skew

June Options

Steep

Average

July Options

Steep

Average

As of today, there is an average demand from call buyers or sellers and high demand by put buyers or low demand by put sellers, all neutral to bearish over the next two months. To summarize, investors are buying a small amount of call and put option contracts and are leaning neutral to bearish over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

E = Earnings Are Decreasing Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on Pfizer’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Pfizer look like and more importantly, how did the markets like these numbers?

2013 Q1

2012 Q4

2012 Q3

2012 Q2

Earnings Growth (Y-O-Y)

58.33%

358%

-10.42%

30.30%

Revenue Growth (Y-O-Y)

-12.37%

-6.65%

-15.85%

-8.66%

Earnings Reaction

-4.46%

3.2%

-1.28%

1.39%

Pfizer has seen increasing earnings and revenue figures over most of the last four quarters. From these figures, the markets have had mixed feelings about Pfizer’s recent earnings announcements.

P = Average Relative Performance Versus Peers and Sector

How has Pfizer stock done relative to its peers, Merck (NYSE:MRK), Novartis (NYSE:NVS), Sanofi (NYSE:SNY), and sector?

Pfizer

Merck

Novartis

Sanofi

Sector

Year-to-Date Return

14.66%

10.60%

18.59%

15.60%

15.91%

Pfizer has been an average performer, year-to-date.

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Conclusion

Pfizer provides valuable products for the health, wellness, and support of people and animals living in a multitude of countries around the world. The stock has been a strong performer in recent years and looks to have a strong uptrend intact. Earnings and revenue figures have been decreasing a bit, over the last four quarters, which has sent mixed signals to investors. Relative to its strong peers and sector, Pfizer has been an average year-to-date performer. WAIT AND SEE what Pfizer does this coming quarter.

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