Pfizer Generational Buying Opportunity?

$Pfizer(PFE)$

Pfizer Stock Is Down 63% – Is the 8% Dividend a Trap or a Gift?

Pfizer’s stock has been nothing short of a trainwreck over the past few years. The stock is down over 63% from its all-time highs, and it's been one of the worst-performing large-cap names in the entire healthcare sector. The sentiment around this company has been so negative that its dividend yield has ballooned to nearly 8%—a level usually reserved for distressed companies.

Now, an 8% yield on a massive, globally diversified pharmaceutical company like Pfizer is incredibly unusual. Normally, that kind of yield signals either a dividend cut on the horizon or some serious business deterioration. So, is the yield sustainable? Or is it a trap?

That’s exactly what I want to break down in this video. I’ve covered Pfizer multiple times on this channel before, and honestly, I’ve been wrong so far. I initially thought the stock would bottom out in the $26 to $25 range, but it continued to fall. The market clearly doesn’t want to touch it right now. But just because sentiment is negative doesn’t mean the fundamentals are broken. In fact, this might be exactly the kind of setup that value investors live for.

The Bigger Picture: Pharma Is Under Pressure

First, let’s zoom out a bit. Pfizer isn’t the only pharmaceutical stock under pressure. This is happening across the board:

• Merck

• Novo Nordisk (NVO)

• Eli Lilly

• Pfizer

All these companies are facing a combination of patent cliffs, regulatory scrutiny, and post-COVID normalization in revenues. The entire pharma sector is seeing a valuation reset. These stocks have become deeply unpopular, and in some cases, they’re trading at multi-year lows despite having solid balance sheets and recurring revenues.

So, from a contrarian standpoint, this might be the time to dig in.

Pfizer’s Latest Earnings: Surprisingly Strong

Let’s take a closer look at Pfizer’s latest quarterly earnings, which were actually better than expected:

• Earnings per share (EPS) came in at $0.63, beating Wall Street’s estimate of $0.46.

• Revenue also came in slightly above expectations.

The standout performer in 2024 has been Pfizer’s oncology division, which is growing rapidly—up 26% year-over-year—driven by the acquisition of Seagen, a move that’s starting to pay off.

Here's how the different segments are doing:

• Primary Care (the legacy business): Still declining, as expected. This includes older drugs and COVID products.

• Specialty Care: Up 12% year-over-year, showing solid momentum.

• Oncology: The real growth engine right now, and potentially Pfizer’s key to offsetting future patent losses.

It’s worth noting that a huge chunk of Pfizer’s revenue during the pandemic came from COVID vaccines and antiviral treatments. That wave is now behind them, and the market is clearly punishing them for the drop-off. But Pfizer has been transitioning away from this reliance and investing in higher-growth areas.

The Dividend: Red Flag or Buying Signal?

Let’s talk about that 8% dividend yield.

Normally, when you see a yield that high, your first instinct should be: “Is this sustainable?” Because usually, it’s not. But in Pfizer’s case, the numbers tell a slightly different story.

Here’s a breakdown:

• Annual dividend payout: ~$9.5 billion

• Free cash flow in 2024: $9.88 billion

• Projected free cash flow for 2025: $17.8 billion

So, in 2024, the dividend was just covered. But in 2025, management expects free cash flow to nearly double, giving Pfizer plenty of cushion to maintain the dividend and even pursue other shareholder-friendly activities.

Where is that free cash flow growth coming from?

1. Cost-cutting: Pfizer is targeting $4.5 billion in savings by the end of 2025 through operational efficiency and restructuring.

2. Oncology growth: Seagen acquisition is ramping, contributing high-margin revenue.

3. Return to historical cash flow levels: Prior to 2023, Pfizer regularly generated $18–26 billion in annual FCF.

And on top of that, there’s an activist investor involved (I’ll dig up the name for a future video), which usually means shareholder value is a top priority. Management is under pressure to perform, streamline operations, and return capital.

Pfizer also explicitly stated that maintaining the dividend is one of their core capital priorities. Based on this analysis, I do not believe a dividend cut is imminent. In fact, the yield may actually be one of the most attractive in the entire S&P 500 right now, especially for long-term income investors.

Buybacks and Debt: What’s Holding Pfizer Back?

Now, let’s address why the stock is still weak.

One of the key reasons is that Pfizer hasn’t been buying back stock. There’s been no internal bid supporting the share price, and in this market, where capital is scarce and investors are picky, that matters.

But here’s the reason why: Pfizer has been laser-focused on paying down debt.

In 2024 alone, they paid down $7.88 billion in debt.

Here’s a look at upcoming maturities:

• $6 billion due in 2026

• ~$980 million in 2027

• ~$5.6 billion in 2028

Once this debt burden is lowered to more comfortable levels—and if free cash flow hits the projected $17.8 billion—they’ll have plenty of room to reinitiate buybacks, and I think that could happen as early as 2025.

I’ve seen this exact same setup play out before with companies like British American Tobacco—when a company pauses buybacks, the stock price falls. But when they resume, it often acts as a floor, supporting price action and rebuilding investor confidence.

Risks: Patent Expiry and Drug Pipeline

Now, to be fair, there are real risks.

The biggest one? Patent expirations.

Pfizer is facing the loss of exclusivity on several of its blockbuster drugs, including Eliquis, which is a major revenue generator. As these drugs go off-patent, they’ll face competition from generics, which will compress margins and erode market share.

The company’s pipeline has to step up to fill that gap—and that’s not guaranteed. Drug development is expensive, unpredictable, and often hit-or-miss.

There’s also political risk. The U.S. government is taking a more aggressive stance on drug pricing, and this could impact Pfizer and the industry at large in the coming years.

Eliquis Patent Expiry: A Major Risk for Pfizer

One of the biggest red flags for Pfizer right now is the looming patent cliff—and Eliquis is at the center of it. Eliquis has been a key revenue and profit driver for Pfizer over the past several years. It’s a legacy drug, but it's still contributing a significant portion of both top-line growth and bottom-line profitability.

Unfortunately, that revenue stream is set to be disrupted soon. The U.S. patent for Eliquis expires in 2026, and it will also lose exclusivity in Europe and Japan around the same time. That’s a massive blow to Pfizer’s cash flows. And Eliquis isn’t the only drug at risk—several of their legacy products are facing similar expirations—but Eliquis is by far the most impactful.

Now, the CEO has acknowledged this challenge. He has stated that while revenue growth isn’t expected in the near term, Pfizer believes its new drug pipeline will offset the declines from expiring patents. In other words, the game plan isn’t to grow—it's to tread water, at least for now.

And Wall Street seems to agree. Analysts aren’t pricing in any meaningful revenue growth over the next few years. Expectations are for revenue to remain flat, or at best, slightly recover as the pipeline ramps up. So that’s a big part of why the stock is so cheap right now—Pfizer isn’t growing, and the market isn’t betting on it to start growing any time soon.

They are exploring potential entries into the GLP-1 weight loss market, which is currently dominated by Novo Nordisk (NVO) and Eli Lilly (LLY). If Pfizer can develop or acquire something credible in this space, it could change the narrative entirely. But so far, there’s nothing material in that pipeline to support this as a near-term catalyst.

Tariff Risk: What About a Trump-Led Trade War on Pharma?

Another major concern being discussed in political circles—especially with a potential Trump 2025 presidency—is the threat of new tariffs on pharmaceutical imports, with a push to bring drug manufacturing back to the U.S.

At first glance, this sounds bad for Pfizer, considering that a decent portion of their manufacturing is international. However, Pfizer is actually better positioned than most of its competitors to handle this kind of policy shift.

Here’s why:

• Pfizer already has 10 manufacturing sites and 2 distribution centers in the United States.

• According to the CEO, Pfizer could reallocate production from overseas to these domestic sites without building new infrastructure.

• This gives them flexibility and a cost advantage if tariffs are imposed.

So while tariff risk is real, I don’t view it as a thesis-breaker. If anything, Pfizer might benefit relative to its peers, simply because it already has the domestic footprint to absorb the shock.

And frankly, given the softening tone around tariffs in other sectors—like semiconductors—there’s a chance that the pharmaceutical industry will face similar leniency or delayed enforcement. It’s something to monitor, but not panic about.

Cash, Debt, and 2025: A Pivot Year for Pfizer?

Now here’s where things get more optimistic.

Yes, Pfizer has a lot of debt. But they also have around $20 billion in cash and cash equivalents on their balance sheet. And with free cash flow expected to jump to $17.8 billion in 2025, the company will have a lot of flexibility.

That’s why I believe 2025 could be a turning point for Pfizer:

• They’ve already made big progress in deleveraging, paying down $7.8 billion in debt recently.

• With cash flow recovering and cost savings kicking in, they’ll have room to reinitiate buybacks, pursue M&A, or even launch new products to offset patent losses.

If Pfizer does reintroduce a buyback program, that could be a big catalyst. The lack of buybacks in 2024 was one of the reasons the stock remained weak—there was no natural bid in the market. But once buybacks resume, that could help stabilize the stock and rebuild investor confidence.

Valuation: What’s the Market Pricing In?

Here’s where it gets interesting from a value investor’s lens.

Let’s say Pfizer gets:

• No revenue growth

• No margin expansion

• No multiple re-rating

• And just maintains the status quo.

Under those conditions, you’d expect your return to roughly equal the free cash flow yield, which right now sits at 14.6%. So even if Pfizer does nothing extraordinary, the market is offering you 14–15% a year just to hold the stock—assuming revenue doesn’t fall off a cliff.

That’s a solid base-case return for a company of this size.

Now add in the optionality:

• If Pfizer lands a major GLP-1 breakthrough, like NVO or Eli Lilly, valuation could rerate overnight.

• If free cash flow yield compresses to 8%, you’re looking at 20–25% annual returns through multiple expansion.

• If buybacks or new drug launches gain traction, the market might price in growth again.

So while there are real risks—like the Eliquis cliff, political pressure, and execution risk on the pipeline—there’s also a lot of embedded upside that the market isn’t currently pricing in.

Bottom Line: The Market Hates Pfizer—That’s Why I’m Watching Closely

The chart looks terrible. Sentiment is awful. Analysts aren’t optimistic. And yet… the fundamentals don’t look nearly as broken as the price action suggests.

• The dividend looks safe, backed by improving cash flow.

• The company has the cash and infrastructure to weather political and operational challenges.

• There’s hidden value in the pipeline and plenty of dry powder for strategic M&A.

I’m not saying Pfizer is a screaming buy right now—but I do think the risk/reward is skewed in favor of long-term investors. The downside is likely limited by the dividend and cash flow, while the upside depends on whether they can stabilize and execute on the next growth phase.

Personally, I’ll be tracking the story closely and revisiting my thesis every 3 to 6 months, especially as we get more clarity on the 2025 pipeline and any moves in the GLP-1 space.

Conclusion

Pfizer is hated, beaten down, and unloved—but that’s exactly when you want to be doing research.

• The dividend looks sustainable, not at risk.

• Free cash flow is poised to rebound sharply in 2025.

• There’s a strong chance of buybacks resuming once debt is under control.

• Valuation is attractive for long-term investors with patience.

I’m personally digging deep into Pfizer and several other pharma stocks. I think the sector is offering a rare opportunity for value-focused investors. Stocks don’t become this unloved unless something is broken, but if the market is overreacting, that’s where the alpha comes from.

Disclaimer: I want to make it clear that I am not a financial advisor, and nothing I say is intended to be a recommendation to buy or sell any financial instrument. Additionally, it's important to remember that there are no guarantees or certainties in trading or investing, and you should never invest money that you can't afford to lose.

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