How richly valued are stocks without delay? Legendary investor Warren Buffett has built Berkshire Hathaway‘s money stockpile as much as roughly $277 billion. When Buffett is sitting on that much money because he cannot find appealing investments to purchase, you realize stocks are expensive.
There are exceptions, though. In a market that is broadly speaking priced for perfection, three Motley Idiot contributors have identified what they think are bargain stocks to purchase: Axsome Therapeutics (NASDAQ: AXSM), CRISPR Therapeutics (NASDAQ: CRSP), and Pfizer (NYSE: PFE).
A biotech with multiple catalysts on the horizon
Prosper Junior Bakiny (Axsome Therapeutics): Few things can jolt biotechs, especially relatively small ones, like solid clinical and regulatory wins. Axsome Therapeutics, a drugmaker with a market cap of about $4.3 billion, could experience quite a number of of those in the subsequent two years. It has already made tremendous progress for the reason that start of the last decade, going from a clinical-stage biotech to at least one with two approved products in the marketplace. However it is not done yet.
Inside the subsequent 12 months, AXS-07, a possible therapy for migraines, and AXS-14, an investigational treatment for fibromyalgia, could each earn regulatory approval. The corporate can even release results from multiple clinical trials in the approaching months. Positive results could lift Axsome Therapeutics’ share price.
Is the biotech a bargain stock? In my opinion, the reply is yes. While Axsome Therapeutics generates little revenue and remains to be unprofitable — which is not unusual for biotechs of this size — its late-stage pipeline is incredibly promising. Before long, it must have a lineup with 4 to 6 products that can generate growing sales for years.
Axsome Therapeutics’ valuation continues to lag the potential of its pipeline. Sure, it could experience clinical and regulatory setbacks — indeed, it has already faced some. Nevertheless, there may be a very good probability that it is going to generate strong returns in the subsequent five years, partly because its likely successes aren’t baked into its valuation. That is why I’d advise investors to purchase the stock today.
A biotech with tons of upside
David Jagielski (CRISPR Therapeutics): Even though it may seem to be nearly every growth stock is trading at a major premium today, there are some bargain-basement options available. One is gene-editing company CRISPR Therapeutics. It’s down 24% this 12 months, but optimism must be higher than ever for the business because it is on the cusp of some exciting growth opportunities.
Throughout the past 12 months, the Food and Drug Administration approved CRISPR’s treatment Casgevy for 2 indications — sickle cell disease and transfusion-dependent beta-thalassemia. It could possibly be a life-changing treatment for patients with these conditions because it provides them with a functional cure. That is a part of the explanation why its list price is as high because it is — $2.2 million. CRISPR will split the profits on Casgevy 40/60 with its development partner, Vertex Pharmaceuticals.
Prior to this, CRISPR did not have any approved products; now, it could have a path to profitability. But despite this, the biotech stock is trading around the degrees it was at back in 2019. Casgevy has the potential to generate greater than $1 billion in annual revenue at its peak and is prone to play a pivotal role in CRISPR’s growth.
For investors searching for an actual bargain, you needn’t look much further than CRISPR Therapeutics. The business remains to be within the early stages of rolling out Casgevy, and over time investors should expect to see stronger financial results from the corporate. As that happens, it could trigger a giant rally.
Post-pandemic problems but a brighter future
Keith Speights (Pfizer): I won’t sugarcoat matters: Pfizer faces some problems. Sales of COVID-19 vaccine Comirnaty have plunged as worries concerning the pandemic have subsided. Several of the corporate’s top blockbuster drugs will lose patent exclusivity over the subsequent few years. And Pfizer recently voluntarily withdrew its sickle cell disease drug, Oxbryta, from the market due to safety concerns.
Due to these problems, Pfizer’s share price has fallen by greater than 50% since late 2021. Nevertheless, there have been two positive effects of this steep decline for investors. First, Pfizer’s forward dividend yield has risen to five.7%. Second, the stock’s valuation has turn out to be way more attractive. Pfizer’s shares now trade at 10.6 times forward earnings. That is well below the forward earnings multiple of 18.6 for the S&P 500 healthcare sector.
This low metric raises a matter, though: Is Pfizer stock a price trap? I feel the reply is a convincing “no.” The corporate’s future is brighter than you would possibly think.
Pfizer recently returned to year-over-year revenue growth for the primary time since late 2022, when its COVID-19 vaccine and antiviral sales were at their peak. Acquisitions have been key to this turnaround. Migraine drug Nurtec ODT, which Pfizer picked up with its 2022 acquisition of Biohaven, contributed $356 million in sales within the second quarter of 2024. Adcetris and Padcev, cancer drugs added to Pfizer’s lineup with its 2023 buyout of Seagen, together generated $673 million in sales in Q2.
I expect latest products — each those developed in-house and people gained through acquisitions — will greater than offset the declines in revenue from drugs that lose their exclusivity over the subsequent several years. Pfizer’s pipeline, which features 33 late-stage programs, could produce other big winners.
Must you invest $1,000 in Axsome Therapeutics without delay?
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David Jagielski has no position in any of the stocks mentioned. Keith Speights has positions in Berkshire Hathaway, Pfizer, and Vertex Pharmaceuticals. Prosper Junior Bakiny has positions in Vertex Pharmaceuticals. The Motley Idiot has positions in and recommends Axsome Therapeutics, Berkshire Hathaway, CRISPR Therapeutics, Pfizer, and Vertex Pharmaceuticals. The Motley Idiot has a disclosure policy.
3 Bargain Stocks to Buy in a Market That is Priced for Perfection was originally published by The Motley Idiot