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MarketWatch: Pfizer beat earnings but here’s why this analyst downgraded the stock to neutral

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Pharmaceutical giant Pfizer
PFE,
-1.28%

beat earnings expectations and lifted its guidance this week, but analysts at Mizuho Securities downgraded the stock to Neutral from Buy on Thursday, maintaining its $42 price target.

Pfizer had raised its sales estimates for its COVID-19 vaccine on Tuesday, which meant revenues for the year from the shot could be worth $26 billion, an increase from $15 billion.

Read: Pfizer beats earnings expectations and lifts guidance, as COVID-19 revenue outlook increases 73%

In his note, Mizuho analyst Vamil Divan credited Pfizer with a “stunning beat” in its first-quarter update, with most of the raise driven by the COVID-19 vaccine. But he warned: “With the recent strength in Pfizer shares, we find it more challenging to see clear drivers of meaningful upside, leading us to downgrade the stock to Neutral, while maintaining our $42 PT [price target].

“Cash flows from COVID-19 vaccine sales provide Pfizer with greater optionality, but we wait to see how Pfizer allocates that capital before assessing whether they have improved their 2026-2030 outlook.”

He added that success in its pipeline is critical to drive further upside, but that the risk and reward for key assets — such as dermatitis treatment Abrocitinib, autoimmune inhibitor Ritlecitinib, and pneumonia vaccine Prevnar-20 — is now more balanced.

“While Pfizer’s near-term outlook remains strong and has been boosted by their COVID-19 vaccine, we believe it will be important for these pipeline catalysts to deliver in the coming months in order for investors to gain more comfort with Pfizer’s outlook beyond the next four years and drive Pfizer shares meaningfully higher,” he said.

Read: Vaccine makers lower after U.S. says it supports IP waivers

Shares in Pfizer, BioNTech
BNTX,
-1.79%
,
and Moderna
MRNA,
-2.36%

were down on Thursday morning in premarket trading, after U.S. Trade Rep. Katherine Tai said the U.S. supports the waiver of intellectual-property protections on COVID-19 vaccines.

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