Pfizer's Valuation Is Attractive, And JPMorgan Wouldn't Be Surprised To See A Breakup

JPMorgan’s Chris Schott believes that Pfizer Inc. (NYSE: PFE) is well positioned in the currently volatile market due to its improving business fundamentals and attractive valuation and yield, which could provide a floor to the stock while the company mulls strategic opportunities.

The analyst re-initiated coverage of the company with an Overweight rating and price target of $38.

Healthy Fundamentals

Following the failure of the merger with Allergan plc Ordinary Shares (NYSE: AGN), Schott expects Pfizer to remain “very focused on shareholder value creation, and would not be surprised to see the company pursue a break-up of the larger organization and/or additional mid-to-large sized business development transactions over the next 12-24 months.”

Related Link: 6 Investment Banks Lost More Than $200 Million From Pfizer-Allergan Deal Collapse

The analyst also believes that the company entered 2016 with robust fundamentals, including several new product opportunities that have outperformed and call options on some pipeline items with low expectations.

“In addition, management has been exploring a potential break-up of the larger organization and intends to make a decision on such a split by the end of 2016,” Schott pointed out.

Future Opportunities

Schott also continues to believe that the company has business development opportunities, with potential for M&A to build a more compelling story.

The analyst believes that management would look for potential deals that could strengthen the growth profile of the company’s innovative business, while “cementing the business’s status as a top-tier biopharma.”

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