The COVID-19 pandemic rages on, and people the world over are fixated on one thing: a cure or a vaccine.
Pfizer Inc. (NYSE:PFE) saw its share price soar after the company announced that its trial coronavirus vaccine was proving to be very effective. Pfizer stock gained nearly 10% after the company made the announcement.
But does that make PFE stock the top coronavirus stock right now? The short answer: yes. The long answer: it’s complicated.
Here are the details.
In early November, Pfizer announced that its trial vaccine may be more than 90% effective in preventing COVID-19, and that the company was likely on track to file an emergency-use application with U.S. regulators later in the month. (Source: “Pfizer Says COVID-19 Vaccine Is Looking 90% Effective,” Associated Press, November 10, 2020).
Now, let’s put this into context.
The data that Pfizer showed was from 94 infections in a study that has enrolled 44,000 people. Still, the fact that the results were positive was enough to significantly boost Pfizer stock.
U.S. regulators have instructed companies to track half their participants for side effects for at least two months, the time period in which complications typically crop up. Pfizer expects to reach that milestone soon, but said on November 9 that no serious safety concerns had been reported.
“We’re in a position potentially to be able to offer some hope,” said Dr. Bill Gruber, Pfizer’s senior vice-president of vaccine clinical development. “We’re very encouraged.” (Source: Ibid.)
Meanwhile, President Donald Trump took to Twitter to voice his support.
STOCK MARKET UP BIG, VACCINE COMING SOON. REPORT 90% EFFECTIVE. SUCH GREAT NEWS!
— Donald J. Trump (@realDonaldTrump) November 9, 2020
While Pfizer Inc. is likely to push for the emergency privileges that would hasten the approval process of a vaccine, there are some genuine concerns.
The U.S. Food and Drug Administration (FDA) recently voiced its concern about a COVID-19 vaccine being rushed out the door only for it to be proven ineffective.
Such a scenario would not only lead to higher rates of infection because people would falsely believe they had been immunized, it would also erode the public’s trust in a future vaccine.
And considering the distrust among segments of the American population when it comes to vaccines, the FDA is wary of making that hill any steeper.
That means we may end up waiting longer for coronavirus vaccines than companies and individuals would like.
To be fair, the FDA has a reasonable argument, so it’s a tricky situation.
Back to Pfizer: the longer we wait for the release of its COVID-19 vaccine, the longer you’ll have to wait for big gains from PFE stock.
It’s worth noting that Pfizer Inc. is among 10 companies looking to produce a coronavirus vaccine. It’s not a winner-take-all scenario, however, as there will be a huge global demand for the vaccines.
But if one vaccine proves to be more effective than the others, I expect we’ll see that one rise in demand, relative to the competition. That will affect the value of coronavirus stocks.
Is PFE Stock the Top Coronavirus Stock?
All in all, it looks like a big win for Pfizer Inc., right? Yes, but that doesn’t mean Pfizer stock is the top coronavirus stock.
While the company’s vaccine may be effective and PFE stock may be on the rise right now, there’s a lot to consider before you invest.
And while there’s little doubt that Pfizer stock is on everyone’s mind right now, it may not end up being the top coronavirus stock—even if the company’s vaccine is the best on the market.
That’s because Pfizer Inc. is an old company, coming up on 200 years. And it’s one of the largest and richest companies in the world. It has a market cap of $203.7 billion.
In other words, while its COVID-19 vaccine will have global demand and applications, Pfizer is already so big that releasing a successful vaccine wouldn’t radically alter its share price.
It would still send Pfizer Inc.’s shares soaring—maybe even 20% or 30%—but we’re not looking at exponential growth unless some unthinkable scenario were to take place. Like if Pfizer’s COVID-19 vaccine were to be the only one in town and no competitor would be able to challenge it.
Moderna Inc (NASDAQ:MRNA), by contrast, is much more likely to see huge gains if it releases a successful coronavirus vaccine.
Chart courtesy of StockCharts.com
While both coronavirus stocks are looking decent right now (about even), when you zoom out and look at their performance year-to-date, Moderna stock is the clear winner.
Chart courtesy of StockCharts.com
That’s because MRNA stock has a market cap that’s about 1/10 that of PFE stock.
So Moderna stock has much higher growth potential, even considering how massively the stock has surged in 2020.
The flip side is Moderna Inc’s unproven track record; the company has never produced a vaccine before. So that means there are question marks surrounding MRNA stock, but also more potential for growth.
Pfizer stock, by contrast, is safer (and offers a 4.1% dividend yield) but will likely not get the huge boost that Moderna stock would in the event of releasing a successful COVID-19 vaccine.
The top coronavirus stocks are among the stocks most likely to see massive gains in early 2021. That’s because we’ll likely see several coronavirus vaccines go to market in the new year. People the world over will be clamoring for them.
While Pfizer Inc. is the most notable of the companies, due to its successful COVID-19 vaccine trials, there’s much more room for stock gains among smaller companies like Moderna Inc.
In other words, investors looking for higher growth potential (and more volatility) might want to stay away from PFE stock, while those looking for more stability and steady growth might want to consider it.