For the third day in a row, shares of big pharma bellwether Pfizer (NYSE: PFE) are heading higher — which is kind of curious. Just last week, Pfizer issued downbeat guidance for the year ahead. But today, analysts at Citigroup put out a note suggesting that Pfizer is lowballing the market and setting itself up to beat earnings in 2024.

Pfizer stock is up 3.1% through 10:50 a.m. ET in response.

What Pfizer said

On Wednesday last week, Pfizer guided investors on what to expect from it in 2024. With demand for COVID-19-related vaccines and treatment continuing to dwindle, Pfizer predicted sales of Comirnaty (the Pfizer coronavirus vaccine) and Paxlovid (the Pfizer treatment for coronavirus) will total only about $8 billion next year. The company’s acquisition of Seagen will add about $3.1 billion worth of oncology sales. But even so, total sales for the year will range from only $58.5 billion to $61.5 billion — so $60 billion at the midpoint, which works out to about 4% year-over-year growth.

Non-GAAP (adjusted) earnings will range from $2.05 to $2.25 per share. And this is even after cutting $4 billion in annual costs. (Pfizer explained that the cost of acquiring Seagen will subtract about $0.40 per share from the year’s profit.)

What Citigroup says about Pfizer

As reported on The Fly today, Citi is putting Pfizer stock on a “90-day catalyst watch,” anticipating that sometime in the next three months (i.e., by the time Pfizer comes out with new guidance in its first-quarter earnings report), the pharmaceuticals giant will report news sufficient to raise its guidance — and its stock price, too.

Citi, you see, thinks Pfizer will earn at least 11% more than the top of the company’s published guidance range — so at least $2.50 per share. Curiously though, that still isn’t enough to convince the banker that Pfizer stock is a buy. The analyst only rates Pfizer stock as neutral.

Is that the right call, though? I mean, if Pfizer earns $2.50 per share, and its shares cost less than $28 today, then that works out to a P/E ratio of only 11.2 on the stock. Pfizer’s excellent dividend yield of 6.2% is enough to cover half that valuation all on its own. Seems to me, if Pfizer is growing even just 4% or 5% per year — which it is promising to do next year — then that more than justifies the valuation on this premier pharmaceuticals play.

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Call me an optimist if you will, but after seeing its stock drop by nearly half over the past year, I kind of think Pfizer stock looks like a buy right now.

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Citigroup is an advertising partner of The Ascent, a Motley Fool company. Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Pfizer. The Motley Fool has a disclosure policy.

Why Pfizer Stock Is Bouncing Back was originally published by The Motley Fool