Pfizer Stock Could Have Higher Prices In Store, But Will It Pull Back First?

Pfizer Inc. PFE shares are showing good recent relative strength versus some of their pharmaceutical peers. The stock has had a great run of well over 300 percent since the 2009 lows.

How much further can the stock go given the relatively low growth rates in both revenues and earnings? Does the company have any organic growth tricks up their sleeves? If and when interest rates begin to rise for good, will Pfizer and other high dividend stocks be in trouble?

That may be a moot question for now as rates appear to be subdued, even if intentionally so due to the FOMC's open market actions. For now, let's take a look at the fundamentals and technicals for Pfizer to get an idea of where shares may be headed.

What The Bulls See

• Strong profit margins of 18.42 percent that spin off positive levered free cash flows of $14.57 billion annually.
• Good management effectiveness metrics: Return on assets of 5.74 percent and a return on equity of 12.30 percent.
• A relatively clean balance sheet: Cash of $36.16 billion versus debt of $36.7 billion, total debt-to-equity ratio of 51.24 percent and a current ratio of 2.67.
• Some very cheap valuation metrics: An enterprise value of $211.34 billion that easily trumps the $63.05 billion market capitalization of the stock, and a price-to-sales ratio of 4.24.
• A strong, Treasury-beating dividend yield of 3.3 percent.

What The Bears See

• Some expensive valuation metrics: A PE ratio of around 16 versus estimated revenue and EPS growth for next year of 0 percent and 6.7 percent.
• A price-to-book ratio of 3.03 (just over the "3" level that typically separates "cheap" from "expensive" – all other things being equal).

The Technical Take

Technicians note that Pfizer stock appears to be in the midst of the next major up leg of a long-term uptrend. The upper edge of the channel at approximately $38.85 is the upside target for the stock above the recent high at $35.45. Support for Pfizer comes in at the horizontal line at $32.96 and then at another horizontal line below that at $31.02.

Technicians note that if the stock came down to either one of the support levels, it would give it a chance to work off some of the "overbought" condition that had built up recently. From either of those support levels, another thrust higher is what the technical crowd is expecting.

Overall...

Pfizer appears to be a good "buy the dip" candidate based on technicals alone. The fundamentals don't seem to justify much more upside. However, a persistent low-interest environment could be a continuing tailwind for this stock. If venturing in on the long side, be sure to honor stop loss triggers.