Pfizer Stock Rises on Report Starboard Takes $1Bln Stake

10月7日

Pfizer Inc. (NYSE: PFE), once a market darling during the COVID-19 pandemic thanks to its breakthrough vaccine, has seen its stock struggle over the past two years. The shares are trading roughly 30% lower than in 2019 and have faced immense pressure due to declining demand for its COVID-related products and a costly acquisition strategy. However, a new catalyst has emerged that may signal a turning point for the pharmaceutical giant—activist investor Starboard Value has reportedly taken a $1 billion stake in Pfizer (NYSE: PFE), setting the stage for a potential turnaround. Let's dive into the technical and fundamental aspects driving this story.

A Billion-Dollar Vote of Confidence
Starboard Value's stake in Pfizer (NYSE: PFE), valued at roughly $1 billion, is a clear signal that the activist hedge fund believes there is untapped value in the company. Starboard has a track record of targeting underperforming companies and pushing for strategic changes to unlock shareholder value. This time, Starboard appears to be focusing on Pfizer’s management, specifically CEO Albert Bourla, who has been criticized for his acquisition-heavy strategy since taking the helm in 2019.

Under Bourla, Pfizer (NYSE: PFE) has spent close to $70 billion on acquisitions, including the $43 billion deal for Seagen in 2022, focused on cancer drugs. While Pfizer (NYSE: PFE) hoped these moves would diversify its revenue streams beyond COVID-19, many analysts and investors have questioned the returns on these investments, particularly after Pfizer (NYSE: PFE) recently had to recall a sickle cell drug it acquired in the $5 billion Global Blood Therapeutics acquisition. The drug Oxbryta, which brought in only $300 million last year, had to be pulled due to safety concerns, further denting investor confidence.

Starboard’s approach reportedly includes reaching out to Ian Read, Pfizer’s former CEO, and Frank D’Amelio, its former CFO, both of whom had a more disciplined focus on cost management and investment in novel drugs during their tenure. Under Read, Pfizer shares more than doubled, while Bourla’s leadership has coincided with a significant erosion in shareholder value.

To address these challenges, Pfizer (NYSE: PFE) has already initiated a $4 billion cost-cutting program and is planning further reductions. However, more than $100 billion in shareholder value has evaporated since the peak of the pandemic, putting immense pressure on management to act swiftly.

Technical Outlook
From a technical perspective, Pfizer’s stock has been in a downward trend since its pandemic highs in 2021. However, the recent news of Starboard’s involvement has injected new life into the stock, which is up around 3% in premarket trading. This spike is also above key moving averages, suggesting a potential shift in momentum.

The (Relative Strength Index) RSI currently sits at 42.59, which is just below neutral territory. While not yet in the overbought range, this indicates the stock still has room to run, particularly as investor sentiment improves following the Starboard news. The RSI suggests that the stock may be exiting its oversold condition, aligning with a bullish outlook.

Pfizer has been trading in a falling trend pattern, characterized by lower highs and lower lows. However, the recent surge in premarket trading suggests a potential break from this pattern. If the stock can maintain its momentum and break through key resistance levels, we could see a reversal in its overall trend.

PFE has moved above several key moving averages, which often serve as support and resistance levels. Breaking above these averages can be a bullish signal for traders, especially in combination with improving fundamentals driven by Starboard’s involvement.

Market Performance vs. Peers
Pfizer's shares have been relatively flat in 2024, underperforming the broader market, which has seen a 21% rise in the S&P 500. This poor performance is in part due to fading COVID-19-related revenues and costly acquisitions that have yet to yield significant returns. The company’s stock is currently about 50% below its pandemic peak.

However, it’s worth noting that while Pfizer (NYSE: PFE) has underperformed, it still maintains a massive market capitalization, and its core pharmaceutical business remains strong. The company’s portfolio includes blockbuster drugs and a robust pipeline of potential therapies, particularly in oncology. Should Starboard’s involvement lead to a more disciplined approach to M&A and cost management, Pfizer could be well-positioned for a resurgence.

Outlook: Can Starboard Revive Pfizer?
While it’s too early to say definitively what Starboard's exact plans are for Pfizer, the involvement of an activist investor of this magnitude is often a positive signal for shareholders. Starboard has historically been successful in unlocking value in companies, and if Pfizer’s management is willing to make the necessary changes, we could see a significant turnaround in its stock price.