By most metrics, the stock market is worth a premium right now. But that doesn’t mean bargains can’t be found.
Three Motley Fool contributors think they’ve identified cheap healthcare stocks to buy today. That’s why they chose it CRISPR Therapeutics (NASDAQ: CRSP), Science of Gilead (NASDAQ: GILD)and Pfizer (NYSE: PFE).
You can still enter on the ground floor
Prosper Junior Bakiny (CRISPR Therapeutics): The opinion of a relatively small biotech company that generates little profit—there is no exact science. Even so, CRISPR Therapeutics, a gene-editing specialist, looks cheap at current levels. CRISPR Therapeutics’ market capitalization of $4.2 billion despite the recent approval of Casgevy, a treatment for two blood-related diseases developed in collaboration with Vertex Pharmaceuticals.
CRISPR Therapeutics and Vertex Pharmaceuticals are looking for big opportunities with Casgevy. The drug costs $2.2 million in the U.S. He estimates the market for 35,000 patients in the U.S. and Europe, with an additional 23,000 in some countries in the Middle East where Casgevy is also approved. CRISPR Therapeutics should eventually generate more than $1 billion in sales from Casgevy.
The company also demonstrated that its gene-editing platform can produce tangible results in unlocking treatments that are only available. There is a world of opportunity: There are many situations where there is no approved treatment. Many others need a better standard of care. One of CRISPR Therapeutics’ more promising projects is its work on type 1 diabetes, where the company is trying to develop functional drugs.
In my opinion, CRISPR Therapeutics is a biotech giant. Casgevy will bring in funds that will help propel the gene editing platform. In the next five years, expect more significant clinical and regulatory advances from the company. Although CRISPR Therapeutics has generated strong profits since its 2016 initial public offering (IPO), there is still significant upside for the biotech, at least for investors willing to be patient.
Gilead Sciences could make an underrated growth stock
David Jagielski (Gilead Science): What are the best pharmaceutical stocks you don’t want to miss right now? Science of Gilead. While single-digit (and sometimes negative) growth rates may seem disappointing over the past few years, the company has some promising catalysts that could lead to stronger numbers in the future. In addition, it pays a large dividend yielding 3.7% – almost three times better than that S&P 500 an average of 1.3%.
Gilead Sciences recently announced that lenacapavir, a twice-yearly HIV treatment, is highly effective in preventing HIV. It reduced infections by 96% in phase 3 trials. Analysts estimate that the drug, which has been approved to treat people with multidrug-resistant HIV, could generate sales of $4 billion at its peak. This could be a profitable product for the business as Gilead’s sales last year exceeded $27 billion.
Lenacapavir could do wonders for the company’s HIV business, which is Gilead’s slowest-growing. During the first six months of 2024, HIV sales increased by only 3% annually to $9.1 billion. While still the company’s largest segment, growth rates in liver disease (13%) and oncology (17%) were both higher during the period and also indicate exciting growth opportunities for the business in the future.
Although Gilead’s stock has risen modestly this year, the biotech stock is trading at a bargain 12 times forward earnings (based on analyst expectations). For long-term investors, this could be a good stock to buy and hold.
More than meets the eye
Keith Speights (Pfizer): Pfizer has a big loss in recent years, although it has eked out a small gain in 2024. However, I believe there is more than meets the eye with this great drugmaker.
You can blame much of Pfizer’s woes on declining sales of its COVID-19 products. I don’t expect the company to see booming numbers in 2021 and 2022. But I also think 2024 could be a trough year for Pfizer’s COVID-19 vaccine sales.
Another big challenge for the company is the upcoming patent expiration for some of its top products. Unfortunately for Pfizer, that list includes blockbuster drugs Eliquis, Ibrance, Vyndaqel, Xeljanz, and Xtandi.
Pfizer was not thrown off by this patent cliff. It has invested in developing new products, with Abrysvo’s respiratory syncytial virus (RSV) vaccine being particularly popular. The company also used the huge cash generated from the COVID-19 vaccine during the worst of the pandemic to finance major acquisitions, including the purchase of Seagen in 2023. As a result, Pfizer should be able to generate solid growth in the coming years despite losing patent exclusivity for various – variety of products.
Meanwhile, pharmaceutical stocks are priced at a discount. Pfizer shares trade at just 10.6 times forward earnings. That’s lower than the S&P 500 healthcare sector’s forward earnings of 19.6.
If you’re looking for another reason to buy this cheap stock, check out the dividend. Pfizer offers a forward-dividend yield of 5.65%. Even better, the company’s management remains committed to increasing dividend payments over time.
Should you invest $1,000 in CRISPR Therapeutics right now?
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David Jagielski has no position in any of the stocks mentioned. Keith Speights has positions in Pfizer and Vertex Pharmaceuticals. Prosper Junior Bakiny holds a position at Vertex Pharmaceuticals. The Motley Fool has positions on and recommends CRISPR Therapeutics, Gilead Sciences, Pfizer, and Vertex Pharmaceuticals. The Motley Fool has a disclosure policy.
3 Dirt Cheap Stocks to Buy Now was originally published by The Motley Fool