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Pfizer's Double Disappointment a Good Buying Opportunity



In my opinion, and I'm not alone, Pfizer wants to reinvent itself as a British company. If it can domicile itself in the U.K. it will avoid millions of dollars in U.S. taxes each year.

Pfizer also wants to buy AstraZeneca because its pipeline of new drugs in development may help Pfizer's falling EPS and floundering quarterly sales profits. With expired patents on some of Pfizer's blockbuster drugs like Lipitor, cheaper generic brands are entering the market and cutting into its profits.

>>Read More: Tim Cook's Biggest Failure at Apple
That's one of the reasons I expect to see the company continue to pursue the purchase of AstraZeneca, even if it means raising the offer price. By using more cash vs. stock Pfizer could keep from diluting the share price.

>>Read More: Regeneron-Avalanche Partnership Underscores Ohr Pharma's Eye-Disease Isolation
Even if it increased the buyout price-per-share by as much as 10%, my research suggests that the addition of the U.K. drug company would add to to Pfizer's earnings beginning next year.

For the moment investors may see the stock's correction as a chance to establish or add to positions. At $30, shares of Pfizer offer a dividend yield-to-price of nearly 3.47%. Competitors such as Merck (MRK) currently offers only a 3.01% dividend yield, while Bristol-Myers Squibb (BMY) shares yield 2.88%.

Pfizer continued its aggressive stock repurchase program in the first quarter, buying back $1.7 billion of its common stock. It's also a company known to offer shareholders worthwhile spinoffs like last year's spinoff of its animal health products division now trading under the name Zoetis (ZTS).

Once the cloud of uncertainty about the AstraZeneca deal is settled I anticipate Pfizer's share price to recover with a 1-year price target of $34. While investors wait they'll be rewarded with a generous dividend and the prospect of more stock buybacks in the quarters to come.

At the time of publication the author had positions in PFE

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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Marc Courtenay is the founder and owner of Advanced Investor Technologies, LLC, as well as the publisher and editor of www.ChecktheMarkets.com.
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