Only about a year ago, we may have asked the opposite question: Will electric-car maker Tesla‘s market cap surpass that of pharmaceutical giant Pfizer (NYSE:PFE) one day? Pfizer’s market value totaled about $200 billion. And at its lowest point last spring, Tesla’s market cap dipped to $84 billion.
A lot has happened since then. Pfizer became the first to commercialize a coronavirus vaccine — and that vaccine is generating billions of dollars in revenue. And Tesla delivered of a half a million cars in 2020. So far, investors have rewarded Tesla more than they’ve rewarded Pfizer. Tesla’s market cap soared 794% last year — well surpassing that of Pfizer. Now the question is whether the pharmaceutical company can transform strong revenue into share gains — and top Tesla’s market value.
Pfizer versus Tesla
First, let’s look at Pfizer’s market value growth so far compared with that of Tesla. Pfizer’s value has remained in the $200 billion range for the past 20 years. Historically, Tesla’s value has been much lower. But the company showed its ability to win over investors — and quickly — last year. Market value skyrocketed — and now totals about $622 billion.
If Tesla continues growing — even at a slower pace — it will be tough to beat. But let’s make things simple and use today’s market cap figure. So the idea is: Can Pfizer reach a market cap of about $622 billion over the coming four years?
The fundamentals paint a bright picture. Pfizer is the coronavirus vaccine leader. It’s vaccinated the biggest share of the U.S. population. And in the European Union, the company recently won a contract to supply as many as 1.8 billion vaccine doses through 2023. That’s after an earlier contract for 600 million doses to be delivered this year. Pfizer expects the vaccine to generate $26 billion in revenue in 2021. Of course, it splits profits with partner BioNTech. But this still represents a blockbuster level product for Pfizer. In fact, the company said the vaccine will account for 36% of its revenue this year.
Contracts — such as the one with Europe — indicate the company can count on vaccine revenue beyond this year. Experts also have confirmed this, saying the coronavirus is here to stay. And Pfizer’s CEO has said we probably should expect vaccinations on an annual basis.
More good news
Here’s more good news for Pfizer: It doesn’t rely only on the coronavirus vaccine for revenue. The big pharma company has several other growing products such as heart failure drug Vyndaqel and anticoagulant Eliquis. Their sales rose 88% and 25%, respectively, in the first quarter.
All of this is contributing to higher revenue on the horizon. The midpoint of Pfizer’s full-year forecast represents a 71% increase in revenue year over year. The company predicts $70.5 billion to $72.5 billion in revenue this year.
How has Pfizer’s vaccine leadership — and growth in other products — translated into market cap and share price growth so far? Over the past year, both are up about 17%.
That’s not a huge move. Especially considering the world’s focus on coronavirus vaccines. Biotech companies in the vaccine race saw much bigger gains. For example, Moderna‘s share price and market cap have risen more than 200% in the same time period.
Pfizer’s market cap would have to increase 178% to reach Tesla’s current market cap. Considering the growth in valuation we’ve seen so far, I’m not convinced Pfizer will surpass Tesla in the next few years. Past performance shows that even over the past 10 years, Pfizer’s market value only climbed 50%.
What does this mean for investors?
Pfizer may not see its market value multiply at the speed of light. But the stock still represents a sure and steady play for long-term investors. Overall revenue is on the rise thanks to a broad array of commercialized products. And the coronavirus vaccine seems to be in the early days of its revenue story. It’s important to keep in mind that future boosters and use in younger age groups should add to orders and sales. Of course, Pfizer probably won’t leave Tesla in the dust. But this pharma stock still is likely to drive the value of your investment higher over time.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.