Can Pfizer Stock Keep Going?

With shares of Pfizer (NYSE:PFE) trading around $29, 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, as well as vaccines, nutritional products, consumer healthcare products, and products for the prevention and treatment of diseases in livestock and companion animals.

The Food and Drug Administration has given Pfizer’s Duavee drug for the treatment of moderate to severe hot flashes and post-menopausal osteoporosis the go-ahead. It will now go up against Eli Lilly’s Evista, which generated $1 billion in sales last year. “Duavee contains the ingredient bazedoxifene that can act like estrogen on bone to protect density combined with a mixture of estrogens,” Bloomberg reports.

T = Technicals on the Stock Chart are Mixed

Pfizer stock has been trending higher in recent years. The stock is now trading sideways as it digests gains from a recent run. 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 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.

Implied Volatility (IV)

30-Day IV Percentile

90-Day IV Percentile

Pfizer Options

20.07%

70%

67%

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

Put IV Skew

Call IV Skew

October Options

Flat

Average

November Options

Flat

Average

As of today, there is an average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a very significant amount of call and put option contracts and are leaning neutral to bullish 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 Mixed 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 Q2

2013 Q1

2012 Q4

2012 Q3

Earnings Growth (Y-O-Y)

360.50%

58.33%

358.00%

-10.42%

Revenue Growth (Y-O-Y)

-7.12%

-9.30%

-6.65%

-15.85%

Earnings Reaction

0.44%

-4.46%

3.20%

-1.28%

Pfizer has seen increasing earnings and decreasing revenue figures over the last four quarters. From these numbers, 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

15.59%

17.81%

19.67%

6.59%

16.11%

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

Conclusion

Pfizer discovers and develops medicines for people and animals around the world. The FDA has given the green light to Pfizer’s drug Duavee which may be a positive catalyst for the stock. The stock has been surging higher in recent months but is now trading sideways as it consolidates gains from a recent run. Over the last four quarters, earnings have been increasing while revenues have been decreasing, which has produced conflicting feelings among investors about recent earnings announcements. Relative to its peers and sector, Pfizer has been an average year-to-date performer. WAIT AND SEE if Pfizer can break above its consolidation range.

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