As we head into 2026, healthcare stands out as one of the most dislocated areas of the market. One of our favorite ideas within the sector is Pfizer Inc. (PFE), an iconic American blue chip that has climbed its own crowded wall of worry on top of the broader healthcare exodus, advises Tom Hayes, editor of HedgeFundTips.
Ongoing policy uncertainty drove the sector into its third straight year of underperformance, its worst stretch on record. Fund managers are running for the exits and exposure sits at multi-year lows. This shoot-first, ask-questions-later environment has left a long list of high-quality companies on the clearance rack.
PFE is still down more than 60% from its Covid-era highs, when it was effectively king of the world with the top-selling vaccine (Comirnaty) and leading treatment (Paxlovid), generating about $90 billion in supplemental revenue in 2021-2022 alone.
That windfall faded much faster than expected, creating a massive overhang now firmly in the rearview mirror. The core business has stabilized in the low-$60 billion range and earnings power has recovered to a solid baseline. Despite that stabilization, the market continues to fixate on Covid and remains blinded by the late-decade patent cliff ($17 billion - $18 billion of revenue at risk in 2026-2028).
We believe this misses the heavy lifting management has done to drive the turnaround and position the company for its next leg of growth. Management launched a $7.2 billion cost-savings program with the goal of returning to pre-pandemic margins by 2027. That handles the defense. The real upside is the offense.
They used the Covid cash to acquire new growth engines: the $43 billion Seagen deal added four approved cancer drugs and a pipeline expected to scale from about $2 billion to more than $10 billion by 2030. The recent $10 billion Metsera acquisition puts Pfizer right back in the $100-billion-plus GLP-1 race with a differentiated once-monthly platform targeting a 2028 launch. Combined with earlier deals like Arena, Biohaven, and GBT, management sees more than $80 billion in non-Covid sales by 2030.
At just eight times earnings, the market isn’t giving Pfizer credit for any of this and still treats the name as a perpetual show-me story. If management is even half right, we see a clear path to a double from today’s levels over the next few years. If the full vision plays out and healthcare regains favor, the upside is materially higher.
Until then, investors collect a 6.7% dividend yield to wait, fully supported by around $13 billion of annual free cash flow and a strong balance sheet. In a hated sector with powerful midterm tailwinds, Pfizer is a high-quality name with a massive margin of safety. We think 2026 is the year the market finally recognizes it.
