With shares of Pfizer (NYSE:PFE) trading around $27, 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 development attempting to improve its products in order to help people and animals struggling around the world. So long as health is a main concern for people and animals, Pfizer stands to see significant profits.
T = Technicals on the Stock Chart are Strong
Pfizer stock has been on a powerful run over the last several years that has taken the stock to multi-year highs. The stock is currently consolidating after a period of rising prices so it may need some rest here. 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.
(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 | 23.64% | 90% | 89% |
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 | |
| July Options | Steep | Average |
| August 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 very significant 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 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 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 decreasing revenue figures over the last four quarters. From these numberes, the markets have had mixed feelings about Pfizer’s recent earnings announcements.
P = Poor 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 | 10.11% | 18.73% | 12.16% | 10.76% | Top 5 Oil Companies To Watch For 201411.22% |
Pfizer has been a poor relative performer, year-to-date.
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Pfizer is a biopharmaceutical company that attempts to improve lives through its research and development of medicines for people and animals around the world. The stock has been on a powerful run over the last several years but may be currently taking a breather. Over the last four quarters, earnings have increased while revenue has decreased, producing mixed feelings among investors in the company. Relative to its peers and sector, Pfizer has been a poor performer year-to-date. WAIT AND SEE what Pfizer does this coming quarter.
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