Pfizer pares recent gains after JP Morgan slashes rating

The outlook for Pfizer (PFE) remains mixed as the drug maker gears up for a closely-followed leadership change early next year. While the ongoing softness in revenue performance is expected to continue in the near term, the long-term outlook is encouraging, thanks to the management’s initiatives to enhance top-line growth and profitability in the coming years.

Shares of the pharmaceuticals giant dropped in premarket trading Tuesday after JP Morgan lowered them to neutral from overweight, saying that the recent stock rally is not sustainable. While maintaining the price target at $46, the research firm also raised concerns over the company’s pain relief drug Lyrica losing its exclusivity early next year, thereby facing competition from the generic variants.

While the ongoing softness in revenue performance is expected to continue in the near term, the long-term outlook is encouraging

The stock’s ascent to a record high earlier this month and its withdrawal were rather quick. The analyst expects further correction going forward, considering the fact that the Pfizer gained about 22% this year alone. The majority of the analysts covering the stock currently recommend a hold for it, followed by overweight and buy.

Having outperformed both the S&P 500 and Dow Jones in the recent rally, the stock has the potential to move further up in the coming months when performance is likely to be boosted by new product launches, including the treatments for myeloid leukemia and breast-lung cancer which are currently in the pipeline.

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The market will be looking for a better revenue performance when the company announces its fourth-quarter results next month, the first earnings report under Albert Bourla who has been named the new chief executive officer. Currently, the projected revenue growth is below 1%, which is broadly in line with the management’s revised guidance.

An important factor that could affect the stock’s performance is customers’ reaction to the proposal to hike the prices of around 40 medicines, starting next year. The price hike assumes significance as it comes a few months after the company delayed a planned increase after facing criticism from President Donald Trump, who termed the move as unnecessary.  The stock had closed the previous trading session at $44.40, up 1%.

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