One of the companies that has been at the forefront of medical advancements in history is Pfizer. It is also one of the biggest companies in the United States in terms of revenues and one of the biggest pharmaceutical companies in the world in terms of market reach and global presence. This American multinational biopharmaceutical company is also popular among certain investors because of its expansive product portfolio and its capabilities to introduce both new medicines and even popular consumer products. Investing in Pfizer stock means banking on its existing products and capabilities to develop and market new medicines.

Banking on a Pharmaceutical Giant: Advantages and Disadvantages of Pfizer Stock

Pros: Pfizer Stock Advantages

Pfizer develops and produces medicines and vaccines. The company is behind brands and trade names like Advil, EpiPen, Robitussin, and Viagra. It was also behind several popular household and consumer products like ChapStick, Preparation H, and ThermaCare.

The company was also the first to develop and implement processes for mass-manufacturing pharmaceutical products. This has revolutionized the pharmaceutical industry. It is also behind some of the most successful life-saving medicines and vaccines in the world.

A long list of impressive accomplishments and milestones have provided one of the reasons Pfizer has remained a sought-after company to invest in. Adding to this is the fact that it has remained resilient over the years. Below are the advantages of investing in Pfizer stock:

• Strong Product Portfolio: The company has a strong and diverse portfolio of products that range from medicines and vaccines. These include the pneumococcal vaccine Prevnar 13 and breast cancer treatment Ibrance. It also owns and produces well-known brands. Some of these brands are popular over-the-counter medicines. This strong product portfolio translates to a strong and diverse income stream.

• Research and Development: Pfizer invests heavily in research and development to ensure a pipeline of future products, tackle challenging medical conditions, and address future illnesses. The company also engages with the academia and the scientific community for knowledge sharing. Continuous research and development undertakings allow it to ensure long-term relevance and profitability.

• Strong Competitive Advantage: The company draws part of its competitive advantage from its manufacturing expertise and distribution proficiency. It has a large-scale production capability that has been demonstrated during the coronavirus pandemic. Pfizer also has a global network of distribution that includes specific manufacturing facilities and different distribution channels spread out across the world.

• Large-Cap Global Company: Pfizer is considered a large-cap stock with a strong global presence. It has a market capitalization of over $160.00 billion. This makes it a more stable and dependable investment than small-cap and mid-cap pharmaceutical and biotechnology companies which makes it ideal for those who lean toward long-term capital appreciation and some aspects of wealth or capital preservation.

• Dividend-Paying Value Stock: Another notable advantage of Pfizer stock is that it is a dividend-paying value stock. The dividend yields of the company that been increasing for the past 10 years. Furthermore, considering that it is a stable large-cap company, investing in Pfizer is suitable for investors building an income-generating investment portfolio and those who adhere to the principles of value investing.

• Defensive Healthcare Stock: The products of Pfizer are essential. The demands for them are stable because people buy them regardless of the economic condition. The income that comes from owning shares of its stock also provides income during market downturns while its less volatile historical stock price further stability. This makes Pfizer stock a defensive stock that is also suitable for defensive investing.

Cons: Pfizer Stock Disadvantages

The company is dependent on the U.S. market for more than 40 percent of its revenues and sales. It also has few products that generate substantial income streams. Most of its common prescription and over-the-counter medicines compete with generic brands.

It also competes with other large-cap biopharmaceutical or Big Pharma companies like Johnson & Johnson, Novo Nordisk, Eli Lilly and Co., and Merck & Co. There are also threats from emerging focus-oriented companies like BioNTech, Moderna, and ElevateBio.

There are also various factors that can affect its internal situation and external environment. It has to deal with stringent government regulations while navigating through the complexities of its structure. Below are the disadvantages of investing in Pfizer stock:

• Tapered Market Range: The company draws almost half of its revenues from the U.S. market and a few key products. A lot of its established prescription and over-the-counter medicines have also lost significant market shares to generic medicines and other low-cost alternatives from other pharmaceutical companies. This limited market reach means that it is unable to maximize its full income-earning potential.

• Regulatory Risk Exposures: Pfizer is also exposed to different regulatory challenges that include product approval, pricing regulations, healthcare reimbursement rates, importation and exportation concerns, and possible lawsuits. These challenges or issues can affect its profitability and capacity to develop and market new products. Investing in Pfizer carries additional risks on top of inherent risks in stocks.

• High R&D Expenditures: Companies like Pfizer need to invest heavily in research and development to expand its portfolio and refresh its pipeline. This investment is a risky endeavor because not all outcomes have the potential to generate earnings. The research and development undertakings of Pfizer strain its resources and affect its short-term profitability. Investing in Pfizer means betting on these undertakings.

• Relaxed Revenue Growth: The revenue growth of the company has slowed down since 2021 due to the declining demand for its mRNA vaccine and Paxlovid antiviral medicine which were in high demand from 2021 to 2022. The company has also been focusing more on specialty pharmaceuticals and less on consumer products. Several Pfizer products are also nearing the end of their patent exclusivity periods.

• Steady Price Stock Growth: Another disadvantage of Pfizer stock is that it is not a growth stock. The company experienced a considerable increase in its stock price from December 2021 to December 2022 but it has since declined at levels that are even below its previous pre-pandemic levels. This makes investing in Pfizer stock unsuitable for growth investing and individuals seeking significant capital appreciation.

• Short-Term Price Volatility: The stock price of Pfizer is considered stable when viewed from a long-term snapshot but it is still relatively volatile when considering month-on-month price swings. The price movements range from several single-digit dollars to double-digit dollars. Pfizer stock is sensitive to internal factors like clinical trial results, production schedules, production pipeline, and current patent expiry.