What's up guys and welcome back to wall street millennial with new strains of coronavirus such as the delta variant popping up across the globe, there are increasing fears that the pandemic will be with us much longer than we originally thought. Many developing countries have limited access to vaccines and their cases are surging. Many investors have piled into reopening stocks, such as airlines and cruise lines on optimism around the global return to normal, but given the risks, it may also be prudent to own some vaccine plates, which can benefit from the new variants in this video. We're going to go over one vaccine plate which offers a hedge against the reopening stocks and trades at ridiculously cheap valuations.

Keep in mind that we are not financial advisors and this video is, for entertainment purposes, only make sure to do your own research and consult with a professional before making any investment decision. The stock we're talking about is pfizer, ticker symbol, pfe pfizer made the first vaccine approved by the fda in december of 2020, with an efficacy rate of 95 percent. It uses the novel method of messenger rna or mrna to prevent infection. This is similar to what modern uses in its vaccine and they're already starting to see the benefit of vaccine sales.

In the second quarter of 2021, they beat analysts expectations on the top and bottom lines, which were boosted by 7.8 billion dollars of vaccine sales for the quarter. They also said that they expect to sell 33.5 billion dollars worth of vaccines for the full year of 2021.. Despite the massive benefit that they get from, the vaccine, pfizer's stock has only increased less than 20 since pre-pandemic levels, which has added a little under 40 billion dollars to their market cap moderna, which uses the similar mrna technology as pfizer, has seen its stock price increase. One thousand five hundred percent its market cap has increased by more than one hundred twenty billion dollars, pfizer guided for four dollars of earnings per share, which will give them a price to earnings ratio of roughly 10 times 2021 earnings.

This seems like an incredibly cheap valuation, given the strong outlook for vaccine sales. Pfizer is currently the world's third largest global vaccine supplier. As of march 2021, they had contracts to supply 1.17 billion vaccines, mostly to the u.s eu in japan. These are all wealthy countries which have more than enough money to pay for the vaccines.

Moderna only has contracts for 765 million vaccines, but with the new fears around the delta variant, the company has signed even more vaccine contracts in their second quarter earnings. They said that they now expect to deliver 2.1 billion doses of the vaccine and make 33.5 billion dollars of revenue. This means that they are charging about sixteen dollars per dose. They expect to make a high twenties percentage point pre-tax margin for the sales.

This means that they will make roughly four dollars and fifty cents of profit for every single dose that they sell. It's important to remember that almost all governments and developed countries pay for the vaccine and give it to the people for free. So cost is not an issue as long as they can win contracts with governments they'll be able to sell the doses at favorable prices. As of july 28th, 28 of the world population has received at least one dose and 14 have been fully vaccinated, with two doses required for full vaccination.

This means that there could be demand for another 10 billion doses before getting everyone vaccinated, but the opportunity may be much greater even than this. Some of the new variants are more resistant to the vaccine and will require booster shots, possibly as often as every six months. An update on its strategy around potential booster shots that might be needed against covet 19.. They are saying that, while it looks promising just to give a third potential booster of their original vaccine in terms of boosting the antibody levels, out of precaution, they are developing a delta, targeted booster potential booster, shot that they anticipate beginning clinical trials of in august.

If they get the fda's go ahead, they don't know that this will be needed, but they are developing it just in case now. They are also saying that what they've seen from real world evidence, including from israel, makes them more convinced that they think we're going to need boosters within 6 to 12 months after full vaccination. They say, based on the data they've seen while protection against severe disease remained high across the full six months. The observed decline in efficacy against symptomatic disease over time and the continued emergence of variants are key factors driving our belief that a booster dose will likely be necessary to maintain highest levels of protection so mel they are covering all their bases, making sure they're prepared against Delta, if they need it but saying they are reassured by what they've seen already in the data of their original vaccine in israel, the vaccine's efficacy was reduced to 64 after six months.

In response to this development, pfizer and biontech are seeking authorization for a booster shot. Targeting the delta variant, both the fda and the eu regulator say a third shot is not necessary at this time, but once the entire population receives the first doses, they'll likely approve the booster shot. It's hard to overstate how good the new variants are for pfizer. If people have to get annual booster shots, they will make stable recurring revenue for many years to come.

In the second quarter of 2021, they generated 9.2 billion dollars of vaccine sales, which is almost half of their total revenue. The strong vaccine sales caused the company to increase their revenue and earnings items for the full year of 2021.. They now expect to make sales of 78 to 80 billion, which is a more than 10 increase over their previous guidance. The profits from the vaccine will also boost their adjusted earnings per share to four dollars per share.

In addition to the covered vaccine they're also making progress on other segments, they are working on treatments for breast cancer, kidney disease, gene therapy and lyme's disease. They are also applying their messenger rna technology to make an mrna flu vaccine, which can also give recurring revenue every single flu season. So now that we know the growth drivers behind pfizer's business, let's look into their financials to see how much the stock is worth in 2021. They expect to deliver 2.1 billion doses of their coveted vaccine, which they will sell for 15.95.

Each the vaccine sales will decrease going forward as most of the population becomes vaccinated, but, as new variants appear, they will still have significant sales from booster shots. We estimate that sales will decrease until they level off at 750 million in 2024.. They've told us that they expect to make a high 20s percentage point pre-tax profit on the vaccines they'll make more than 9 billion in vaccine profits. In 2021 alone.

They currently have a strong pipeline of cancer, drugs and other vaccines which will drive their growth going forward. We assume that the rest of their business, excluding the covered vaccines, will grow at five percent per year over the next five years. They also said that they expected a 16 effective tax rate for the year. The accounting for pharmaceutical companies can be a bit complicated, so they use adjusted profit which excludes things such as amortization of intangible assets, which are non-cash expenses.

The adjusted income is the simplest number to look at when evaluating the company. Their guidance is four dollars of earnings per share in 2021., after 2021, earnings will moderate somewhat down to a little over three dollars and fifty cents per share declines in the code. Vaccine business will be partially offset by growth in the rest of the business at four dollars of eps. The stock currently trades for a price earnings ratio of 10.7 times at a more conservative eps of three dollars and fifty cents.

Once vaccines saturate, the price earnings ratio would be 12.2 times to put into perspective how cheap that is. Let's compare pfizer to one of its closest competitors moderna both of their vaccines use messenger rna, which is a new method for delivering vaccines. Mrna contains genetic instructions for cells in your body to create the same spike proteins which are on the coronavirus. This allows your immune system to create antibodies, which will defend you if you're exposed to the real virus.

Unlike pfizer, moderna had zero revenue prior to the pandemic, and today all their revenue is dependent on their coveted vaccine. The stock has increased roughly 17 fold, and the market cap sits at 138 billion dollars for the full year of 2021 they're expected to make 18 billion dollars of revenue. This is roughly half of what pfizer expects to make from their coveted vaccine. Moderna is also expected to make 24.57 cents of earnings per share.

This gives them a 14 times price to earnings ratio for 2021, but their earnings will decrease significantly in 2022, as most people become vaccinated in 2020. Pfizer will make a little under 8 billion dollars of after tax profits from the coveted vaccine, based on their guidance. If we apply the same 14 times multiple that moderna has. This makes the new vaccine business worth 110 billion dollars.

Their market cap was 200 billion dollars before covid. So we can add these two numbers together to get a sum of the parts valuation of 310 billion dollars. Pfizer's market cap has increased by 40 billion dollars, so they didn't get nearly as much credit as moderna for their vaccine development with the 310 billion dollar market cap pfizer's stock would be worth 52.60 per share today, which represents 25 upside at the time of recording this Video at the current prices, pfizer looks incredibly undervalued compared to moderna. The main bull case for moderna is that they can use their mrna technology to develop new vaccines and treatments for other diseases in the future.

While this is true, it is also true for pfizer, if anything, pfizer has an even greater ability to develop new mrna drugs because they are such a massive company and have much more resources, alright, guys that wraps it up for this video. What do you think about pfizer? Do you have any other vaccine plays that you like better? Let us know in the comments section below if you enjoy this content, make sure to hit the like button and subscribe. So you don't miss future uploads as always. Thank you.

So much for watching we'll see you in the next one wall, street millennial, signing out.