Part 4

Pfizer Inc. (PFE)

Our next stock pick from the XLV for April is Pfizer Inc. (PFE)


Company background and financial performance

Headquartered in New York City, Pfizer is an American multinational corporation and one of the largest pharmaceutical companies in the world. The company is currently the 4th largest pharmaceutical company by revenue. Pfizer is involved in developing and producing vaccines for a range of medical disciplines, such as oncology, immunology, cardiology, endocrinology and neurology. The company’s products include the blockbuster drug Lipitor, which is used for lowering blood cholesterol, Lyrica for fibromyalgia and neuropathic pain, Difluca used for an oral antifungal medication, as well as Viagra for erectile dysfunction and others.

Pfizer has got eight blockbusters in its portfolio, helping the leading American company achieve a huge success in the pharmaceutical business and it keeps on growing and developing more game-changing products that are expected to continue driving their sales and profits higher in the future, making more money for its shareholders.

By looking at Pfizer’s financial statements, we shall say that the leading pharmaceutical company has been showing a great performance during the past 5 years.
The company has kept on investing in the research and development of new products in order to keep improving the healthcare industry in general. The company has been maintaining a reasonable sales increase over that period, while the net profit has almost tripled in the period between 2015 ($7 billion) and 2019 ($16.3 billion). We have seen a decline in the profitability in 2020 due to the coronavirus pandemic but the company still managed to report a solid net profit figure and maintain its strong positioning in the market it operates. Moreover, the company managed to keep its return on equity at 25-26% in 2020 even during the coronavirus pandemic, while the return on assets figure stood at around 10% last year.

Pfizer is reporting its Q1 financial results on the 27th of April and the earnings expectations are for $0.83 per share, while the company delivered $0.80 per share in the same quarter of last year. In case of a better report than the estimated we would expect the share price to rise right after the event and make high profits to the upside. Pfizer’s revenues and profits are also expected to increase this year due to the COVID-19 vaccine that the company is producing and supplying and we would be able to see the effect of the vaccine on its financial statements in the next few quarters this year.


Technical analysis

PFE had been in a massive uptrend between March and December 2020 where the leading pharmaceutical stock rose from $25 to $42 (68%). Since then, we have seen the stock drop towards the $33 lows and bounce back up towards the current $36 mark. In fact, the price is currently testing the key resistance at $36-$37 and has been struggling to break that level for a few days now since the end of March. Looking at the historical performance of the stock, it has been facing some profit-taking interest at around that resistance since the beginning of 2020 and traders have been cashing in some earnings at that point. Therefore, it is likely to expect some profit-taking scenario in the short-term before traders and investors start buying the stock again ahead of the earnings season. Thus, we would prefer to wait for a little correction that would give us a chance to buy the stock at around the first support at $34, followed by the next major support at $33. We would certainly be interested in buying the stock at around those levels ahead of the earnings report on the 27th of April.


Chart: PFE

We would wait for a bit of a profit-taking correction and start buying the stock at around the first support at $34. Should the price drop further, we would be interested in adding more to our long positions at the next key support at $33. Our initial profit-taking target is set at $36-$37, followed by the next target at $40-$42 where we would be fully cashing in our profits.



Facebook Inc. (PFE)

Our next stock pick from the SPY for April is Facebook Inc. (FB)

Company background and financial performance

Founded in 2004 in the US, Facebook is the largest social media platform in the world.

The company is among the biggest corporations in the world and it keeps investing and growing its portfolio, improving its services and making more money for its shareholders.

Facebook’s portfolio grew from the single Facebook app to multiple apps, such as photo and video sharing, Instagram WhatsApp messaging, as well as Messenger, all part of the Facebook family, which are being used by around 3.3 billion people globally.

Facebook’s sales have been growing rapidly over the past 5 years. The company has actually tripled its sales figure in the period 2016-2020. It reported almost $86 billion in sales in 2020, which came a lot higher than the $70.7 billion for 2019. In other words, the company has performed very well even during the coronavirus pandemic and has managed to increase its sales figure with over 20%. Furthermore, Facebook’s net profit figure has seen an even bigger increase in 2020 ($29.1 billion) compared to 2019 ($18.5), representing a 57% profit surge, which has been extremely profitable for investors and traders owing the stock.

One of the main reasons for the huge success of the company is the fact that customers have been using FB’s platforms even more while being locked down during the pandemic, so we are not surprised to see such a great financial performance presented by the leader in the social media sector. Let’s not forget that almost half of the world’s population uses Facebook (3.3 billion people globally).

Facebook has been benefiting from a steady customers’ growth across all regions, especially Asia Pacific. The company has seen an increased engagement for all the products it offers, such as Instagram, WhatsApp and Messenger as a major growth driver. Moreover, FB’s revenues have been driven by a solid holiday shopping season in the retail sector that benefited from the shift to online commerce especially due to the pandemic. What’s more is that Facebook is expecting revenues and profits remain stable in the first 2 quarters of 2021.

The company beat analysts’ expectations in the past 3 quarters in 2020 and now we are extremely interested in the upcoming Q1 financial results, which would be reported on the 5th of May and the expectations are for earnings of $2.36 per share, while the company delivered $1.71 per share in the same quarter of last year. The expectations are quite high for this quarter. However, by taking into account the strong financial situation in the company and the huge presence it has got in the market it operates, we wouldn’t be surprised if FB manages to beat those expectations and report higher earnings than the estimates. That in turn would be extremely bullish for the stock and we would definitely be interested in buying the stock some point in April ahead of the upcoming report in the first week of May.



Technical analysis

FB stock has been in a massive uptrend in the past year. In fact, the price bounced from the $137 lows on the 18th of March 2020 and broke a few key resistance levels to the upside, such as the $222, followed by the $250 and the $287 and is currently trading at the $298 highs. By looking at the daily chart, we could see the strong resistance at $300-$305 where lots of take-profit as well as general selling interest took place in the past few times the price reached that level since August last year. In other words, the price has been struggling to break that level for quite some time now. Yet, due to the huge rally on the stock, we have seen an overall growth of 117% in 12 months – quite an impressive result.
Therefore, we prefer to wait for a little profit-taking correction before we start buying the stock ahead of the earnings report on the 5th of May.

We would expect to see some buying activity at around the first key support at $289, followed by the next major support mark at $276 where lots of buying pressure is likely to take place.


Chart: FB

We would wait for a correction that could send the price towards our first entry level at around the support at $289-$290 where we would start opening our first buy positions. Should the price drop further, we would then be buying even more aggressively at the next strong support mark at $276, which would give us a chance to get a better average price on our long positions and further maximize our profitability to the upside. Our initial profit-taking target is set for $300-$310, followed by the next target at $325-$330 where we would be fully cashing in all profits and waiting for another correction that would give us a chance to own Facebook stock again in the future.





Sincerely,

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