1 Deeply Undervalued Stock to Buy in the Market Correction

Pfizer's (NYSE: PFE) shares have been southbound for the better part of three years, partly because it was unable to repeat its incredible financial performance during the early pandemic years. However, the company took another dive this year along with the broader market; President Donald Trump's trade wars are leaving few stocks completely unscathed.

There is a silver lining, though, at least for investors focused on the long game. At these levels, Pfizer's shares might just be a steal. Here's why the stock is worth buying today.

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Pfizer can deal with the impact of tariffs

The Trump administration has so far spared pharmaceuticals from its announced tariffs, but has threatened several times to impose some on the industry. Like many other drugmakers (and companies in other sectors, for that matter), Pfizer likely prefers doing much of its manufacturing abroad because it's cheaper. However, tariffs defeat that purpose, and if they're eventually levied on the pharmaceutical industry -- as some CEOs think they will be -- Pfizer might be well equipped to handle them due to its significant existing manufacturing capacity in the U.S.

At a recent conference, Pfizer CEO Albert Bourla pointed out that the drugmaker has the largest U.S.-based manufacturing network in the industry, with 13 sites up and running. Many of those facilities have high capacities to make blockbuster products that are in high demand. In Bourla's view, that puts Pfizer in a good position even if tariffs were to persist.

For many drugmakers without significant manufacturing sites in the U.S., tariffs might lead to meaningful cost increases and margin expansions. Pfizer, though, has the flexibility to shift its manufacturing operations into the U.S. and avoid the tariffs all in one fell swoop.

Manufacturing locally might be more expensive than doing it abroad, but it would be cheaper than dealing with the additional costs imposed by tariffs. That's one of the goals of tariffs: to shift jobs back into the country. So Pfizer is a drugmaker worth monitoring in the current environment, given its significant manufacturing capabilities within U.S. borders.

The business is getting stronger

Pfizer's financial results haven't been as impressive as in 2021 and 2022 because it no longer generates tens of billions of dollars in revenue from its coronavirus products, and they're somewhat unpredictable. The drugmaker can't count on sales from its vaccine, Comirnaty, to grow steadily from one year to the next. Thankfully, Pfizer has decreased its exposure to this product and to its coronavirus medicine, Paxlovid.

In 2024, revenue increased by 7% year over year to $63.6 billion. Though Comirnaty and Paxlovid contributed a combined $11.1 billion, the company's sales grew faster -- by 12% year over year -- excluding these contributions.

Pfizer is moving on thanks to newer approvals and, especially, acquisitions. It strengthened its oncology business thanks to its buying out Seagen, a cancer specialist, for $43 billion -- a sum it could afford to dish out thanks to its success in the coronavirus market. This and other acquisitions it made didn't just shore up its lineup of approved medicines; Pfizer now has an incredibly deep pipeline that should lead to key approvals. It has more than 100 candidates across oncology, immunology, vaccines, and other areas.

Though Pfizer's coronavirus business should impact its top line for a while, growing its lineup through the launch of brand-new products is the way to go, and that's what it should do for the foreseeable future. The company is establishing a strong foundation for the future.

A strong business at a fair price

Pfizer is ready to take on tariffs imposed on the pharmaceutical industry, and has an extensive list of pipeline programs that should eventually lead to blockbusters.

In addition to all that, the stock looks incredibly cheap at current levels. Pfizer's forward price-to-earnings (P/E) ratio is 7.6, while the average for the healthcare industry is more than twice that at 15.8.

Nobody can reliably time the market; Pfizer and broader equities could continue falling for a while, or they could bounce back. However, those who invest in the stock today could see outsized returns, given how cheap its shares have become.

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Prosper Junior Bakiny 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.