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By most measures, the stock market is priced at a premium these days. But that doesn’t mean there aren’t still bargains to be found.
Three Motley Fool contributors think they’ve identified dirt-cheap healthcare stocks to buy now. This is why they chose CRISPR therapies (NASDAQ: CRSP), Gilead Sciences (NASDAQ: GILD)And Pfizer (NYSE:PFE).
You can still board on the ground floor
Good luck Junior Bakiny (CRISPR therapies): Valuing relatively small biotech companies that generate little to no revenue is not an exact science. Still, CRISPR Therapeutics, a gene-editing specialist, looks cheap at current levels. CRISPR Therapeutics’ market cap stands at $4.2 billion despite its recent approval of Casgevy, a treatment for two blood-related diseases it developed in collaboration with Vertex Pharmaceutica.
CRISPR Therapeutics and Vertex Pharmaceuticals are eyeing a huge opportunity with Casgevy. The drug costs $2.2 million in the US. They estimate a market of 35,000 patients in the US and Europe, with another 23,000 in some Middle Eastern countries where Casgevy is also approved. CRISPR Therapeutics should ultimately generate more than $1 billion in sales through Casgevy.
The company has also demonstrated that its gene editing platform can deliver tangible results in unlocking treatments where few are available. There is a world of possibilities: for many conditions there are no approved treatments. Many others have an urgent need for better standards of care. One of CRISPR Therapeutics’ promising projects is its work in type 1 diabetes, for which the company is trying to develop a functional cure.
In my opinion, CRISPR Therapeutics is a biotech giant in the making. Casgevy will secure the funding that will help it advance its gene editing platform. Expect more significant clinical and regulatory advancements from the company over the next five years. Although CRISPR Therapeutics has delivered strong returns since its 2016 IPO, significant upside potential remains for biotechnology, at least for investors who want to be patient.
Gilead Sciences could be an underrated growth stock
David Jagielski (Gilead Sciences): What’s a top pharmaceutical stock you don’t want to overlook right now? Gilead Sciences. While its single-digit (and sometimes negative) growth in recent years may not seem impressive, the company does have some promising catalysts that could lead to stronger numbers in the future. Plus, it pays a great dividend yielding 3.7%, almost three times better than the S&P500 average 1.3%.
Gilead Sciences recently announced that lenacapavir, its biennial HIV treatment, was highly effective at preventing HIV. It dramatically reduced infections by 96% in a phase 3 trial. Analysts estimate the drug, which is already approved to treat people with multidrug-resistant HIV, could generate sales of $4 billion at its peak. That could be a significant revenue-generating product for the company, as Gilead’s revenue exceeded $27 billion last year.
Lenacapavir could do wonders for the company’s HIV business, which has been Gilead’s slowest growth of late. Through the first six months of 2024, HIV sales increased just 3% year-over-year to $9.1 billion. While that is still the company’s largest segment, growth rates in liver disease (13%) and oncology (17%) were both much higher during that period and also represent exciting growth opportunities for the company going forward.
While Gilead’s shares are up slightly this year, the biotech stock trades at a modest 12 times estimated forward earnings (based on analyst expectations). For long-term investors, this could be an excellent stock to buy and hold.
More than meets the eye
Keith Speights (Pfizer): Pfizer has been a big loser in recent years, although it has made a paltry profit in 2024. However, I believe there is more than meets the eye to this major drug manufacturer.
You can blame much of Pfizer’s woes on declining sales of its COVID-19 products. I don’t expect the company to ever see the rising numbers of 2021 and 2022 again. But I also think 2024 could be a low point for sales of Pfizer’s COVID-19 vaccines.
The other major challenge for the company is the impending patent expirations for several of its flagship products. Unfortunately for Pfizer, the list includes the blockbuster drugs Eliquis, Ibrance, Vyndaqel, Xeljanz and Xtandi.
However, Pfizer is not blinded by this patent cliff. It has invested in the development of new products, with Abrysvo, the respiratory syncytial virus (RSV) vaccine, standing out. The company has also used the massive cash generated from its COVID-19 vaccine during the worst of the pandemic to fund key acquisitions, including the purchase of Seagen in 2023. As a result, Pfizer should be able to see solid growth in the coming years despite the loss of patent exclusivity for several products.
Meanwhile, pharmaceutical stocks are priced at a discount. Pfizer’s stock trades at just 10.6 times forward earnings. That’s much lower than the S&P 500 healthcare sector’s earnings multiple of 19.6.
If you’re looking for another reason to buy this dirt-cheap stock, check out its dividend. Pfizer offers a forward dividend yield of 5.65%. Better yet, the company’s management remains committed to growing its dividend payout over time.
Should You Invest $1,000 in CRISPR Therapeutics Now?
Before you buy shares in CRISPR Therapeutics, consider the following:
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David Jagielski has no position in any of the stocks mentioned. Keith Speights has positions in Pfizer and Vertex Pharmaceuticals. Prosperity Junior Bakiny has positions in Vertex Pharmaceuticals. The Motley Fool holds positions in and recommends CRISPR Therapeutics, Gilead Sciences, Pfizer, and Vertex Pharmaceuticals. The Motley Fool has one disclosure policy.
3 dirt-cheap stocks to buy now was originally published by The Motley Fool