Pfizer's Q3 Performance Highlights Resilient Non-COVID Franchises Amid Ongoing Market Skepticism

What happened

Pfizer's stock has rebounded from lows but continues to trade at a discount, reflecting persistent market concerns over COVID-related declines and patent cliffs, as highlighted in a recent article. In Q3 2025, revenue and EPS fell year-over-year but beat estimates, with strong contributions from Vyndaqel, Nurtec, and Padcev offsetting fading COVID revenues. Adjusted margins remained near 76%, supported by lower operating expenses and a $1.5 billion manufacturing optimization program aimed at expanding earnings by 2027, aligning with broader cost-saving targets in the DeepValue report. However, the report underscores significant headwinds, including U.S. vaccine softness, a ~$1 billion IRA Part D headwind, and reduced obesity optionality, which cap near-term upside. The investment debate centers on execution of cost savings and oncology growth, with the stock trading ~19% above intrinsic value, offering limited margin of safety.

Implication

Pfizer's current valuation at ~$24.92, which is 19% above the DCF anchor, implies limited upside without catalysts, necessitating a cautious approach. The company's ability to deliver on its $7.7 billion cost-savings target by 2027, including $1.5 billion in manufacturing COGS reductions, is critical for margin recovery and earnings growth. Near-term risks such as U.S. vaccine demand weakness and IRA Part D impacts could pressure revenue within the $61-64 billion range, challenging stabilization efforts. Positive developments in the Seagen-acquired ADC oncology portfolio might provide growth offsets, but clinical or regulatory setbacks would exacerbate downside risks. Given this balance, investors should await clearer evidence of execution before considering a shift, as the stock currently reflects a fair assessment of risks versus rewards.

Thesis delta

The recent article reinforces Pfizer's resilient non-COVID performance and cost initiatives, which are consistent with the DeepValue report's emphasis on execution and revenue stabilization. However, it does not alter the core thesis that the stock is fairly valued with balanced risks, as headwinds like vaccine softness and IRA impacts remain significant. Investors should view this as confirmation rather than a shift, focusing on upcoming cost-savings milestones and vaccine trends for any potential re-rating.