Investing.com -- Pfizer shares may have found a more balanced risk-reward profile after a sharp decline this year, prompting RBC Capital Markets to upgrade the drugmaker to Sector Perform from Underperform while maintaining its $25 price target. The brokerage said the stock's roughly 11% pullback from its 2026 highs has brought valuation in line with its expectations, reducing the downside risks it had previously highlighted.

RBC said Pfizer's strong first-quarter results could support a higher 2026 outlook, while its dividend yield of nearly 7% should help underpin the shares. The firm believes concerns around revenue erosion and the company's lagging obesity program are now largely reflected in the stock price.

Attention is now shifting to two key late-stage pipeline catalysts expected later this year and into 2027. RBC highlighted sigvotatug vedotin, an oncology candidate in second-line lung cancer, and mevro, an EZH2 inhibitor being developed for metastatic castration-resistant prostate cancer, as the most important near-term drivers of sentiment. The brokerage forecasts peak sales of about $1.2 billion and $2.7 billion, respectively, for the two programs.

The bank remains cautious on Pfizer's obesity ambitions, saying recent Phase 2 data for berobenatide met modest expectations but failed to show meaningful differentiation from rival treatments. RBC warned that more complex dosing requirements in Phase 3 could create execution risks and noted that investors are unlikely to receive significant additional data until 2027 or 2028.

Despite the upgrade, RBC said Pfizer still faces one of the weakest long-term growth profiles among large pharmaceutical companies as several major products approach patent expirations later this decade. The firm expects earnings growth to remain constrained by upcoming loss-of-exclusivity headwinds and said greater visibility into post-2028 growth will be needed before turning more constructive on the stock.

RBC also pointed to potential business-development upside after recent comments from Chief Executive Officer Albert Bourla suggested the company could pursue acquisitions larger than $7 billion, although the brokerage said investors remain divided on Pfizer's track record of deal execution.