Golden Cross Gives Bulls Green Light?
One of the more unexpected tailwinds for healthcare stocks in recent years has been the weight-loss frenzy brought about most notably by Ozempic.
Novo Nordisk’s drug was such a hit that the share price soared by 62% over the past year alone. Yet it’s not the only game in town. Eli Lilly’s weight-loss drug, Mounjaro has shown promising results in clinical trials for weight loss too. Although initially developed for diabetes, its effectiveness in reducing body weight means it too has the potential to become a blockbuster in the weight-loss market.
Fresh off its successes selling COVID vaccines is Pfizer, looking to elbow its way into the market. While Pfizer is more renowned for its vaccines and other pharmaceuticals, its involvement in weight-loss drugs has contributed to its diverse revenue streams. Right now, the company is pinning its hopes on danuglipron, which targets the GLP-1 agonist market.
Will it be the catalyst to turn around a share price that’s been flat on the year and down 20% in the past twelve months?
Key Points
- Pfizer is competing with Novo Nordisk and Eli Lilly in the hyper competitive weight loss segment.
- It’s once-a-day pill offers the potential for an attractive alternative to the injectable solutions on offer by rivals.
- Technically, the stock chart of Pfizer has revealed a bullish golden cross for the first time in years.
Golden Cross Shows Promise
Technical analysts will be downright excited to see Pfizer stock chart reveal a bullish golden cross for the first time in many years. That’s when the 50-day and 200-day moving averages cross, and is typically a signal that institutional capital looks to when considering an optimal time to buy.
Pfizer $PFE forms a Golden Cross for the first time since January 2023 pic.twitter.com/dVWgxnLom4
— Barchart (@Barchart) July 24, 2024
But there’s much more to like than a technically bullish chart.
Weight loss drug shows promise
In the pharmaceutical sector, glucagon-like peptide 1 (GLP-1) agonist drugs have been the hottest thing in town for the past few years because they dampen the appetite of pill-takers and consequently lead to substantial weight loss.
Pfizer’s solution is a take-one-pill-daily offering and it’s been sufficiently successful that the company is willing to proceed with clinical trials. In many ways it offers an attractive alternative to Novo’s injectable offering.
For a company to succeed in this area, patents need to be sufficiently comfortable post pill-taking to ensure they will continue with treatment. Or in short, the pros of losing weight need to largely outweigh whatever the side effects for patients to persevere. The fact that Pfizer is proceeding with clinical trials bodes well on this key measure.
It seems that patients are pleased with the outcomes as well they might when you discover the average weight loss is 13% of total weight over about an 8 month period.
Why Buy Pfizer?
If there is ever a time to buy Pfizer, now might be it. The technicals are finally looking favorable but so too are many of the fundamentals.
Right now, the stock pays a yield of 5.69% while delivering $4.7 billion in profits last quarter. Yes, the company has seen sequential revenue declines on a year-over-year basis for the past 4 quarters, but that is expected to stabilize and be fairly flat over the next 5 years with a marginal 1.2% growth rate forecast.
Net income however is expected to compound at a rapid rate of 49.2% over the coming years, meaning shareholders may have a much brighter future than the past few years have been. Add to that the move into weight loss and Pfizer appears to be a dangerous stock to bet against.
