Price matters. That's true whether we're talking about cars, houses, laptops, or anything else -- including stocks.
Three Motley Fool contributors had price in mind when choosing Axsome Therapeutics(NASDAQ: AXSM), CRISPR Therapeutics(NASDAQ: CRSP), and Pfizer(NYSE: PFE) as top picks for investors right now. Here's why they think buying these dirt-cheap stocks could be a brilliant move.
The market continues to underestimate this stock
Prosper Junior Bakiny (Axsome Therapeutics): It's not easy to value relatively small, unprofitable biotechs with few products. Though that description fits Axsome Therapeutics, there are plenty of clues that, in my view, make the company's market cap of $3.7 billion seem too low compared to its growth potential. Axsome Therapeutics has a rich, late-stage pipeline that should help transform its lineup in the next couple of years.
One of Axsome Therapeutics' two approved products, depression treatment Auvelity, is being tested in a phase 3 study to treat Alzheimer's disease (AD) agitation. It has been extremely challenging to develop AD therapies of any type. And with an aging population, the number of AD patients, including those who suffer from agitation, will increase. There were 6.7 million AD patients in the U.S. last year, a number that could rise to 14 million by 2060 -- roughly 70% of them suffer from agitation.
Auvelity already aced one late-stage clinical trial in AD agitation, so things are looking good. But that's only the tip of the iceberg. With its deep pipeline, Axsome Therapeutics could have five marketed products by the end of next year. Even if these programs don't all pan out, there is substantial upside potential for Axsome Therapeutics.
And just as important, the company is setting up a strong foundation for the long term. Investors looking for a cheap biotech stock should look no further than Axsome Therapeutics.
CRISPR is a stock with loads of long-term potential
David Jagielski(CRISPR Therapeutics): The gene-therapy market can be lucrative for investors to focus on. According to estimates from Grand View Research, the global gene-therapy market will grow at a compounded annual growth rate (CAGR) of 19.5% until the end of the decade. And if you want exposure to that market, a low-priced stock such as CRISPR Therapeutics can prove to be a brilliant move in the long run.
At less than a $6 billion valuation, CRISPR is a stock that looks cheap given the potential for the business to grow much larger. Now that it has an approved gene-therapy treatment in Casgevy, the company could be on the cusp of significant long-term growth. I think CRISPR Therapeutics has an incredible asset in its portfolio with Casgevy. The therapy, though priced at over $2 million, is still considered cost-effective according to healthcare analysts.
Although it has to share in the profits with its development partner, Vertex Pharmaceuticals, the approval of Casgevy for treating sickle cell disease and beta-thalassemia should open up significant growth opportunities for CRISPR, which in the process will also strengthen its financials. With limited revenue, CRISPR has posted a loss in three of the past four quarters. But as its financials improve, that should drive up its valuation in the future.
CRISPR Therapeutics has a game-changing therapy in Casgevy. With more therapies in its pipeline, this is a stock with loads of potential that investors may regret not buying at the current price.
Cheap for a reason but only for a season
Keith Speights (Pfizer): Pick any forward-looking valuation metric you want; Pfizer stock will probably look attractive. My personal favorite is the big drugmaker's super-low price-to-earnings-to-growth (PEG) ratio of 0.27.
To be sure, Pfizer is cheap for a reason. Sales for the company's COVID-19 vaccine Comirnaty and oral therapy Paxlovid continue to plunge. In addition, Pfizer faces a patent cliff over the next few years with multiple key drugs losing patent protection from competition.
However, I think this pharma stock will only be cheap for a season. Why? Pfizer should be able to deliver solid growth despite its challenges.
The company projects annual revenue of $25 billion by 2030 from new product launches that will wrap up by the middle of this year. That's enough to more than offset the estimated $17 billion in lost revenue from drugs with expiring patents.
Pfizer expects its business-development deals will add another $20 billion in new revenue by 2030. That doesn't seem farfetched with the acquisitions of Biohaven and Seagen already finalized. Overall, the company projects revenue will grow by a CAGR of around 10% between 2025 and 2030.
In the meantime, Pfizer offers a juicy dividend yield of over 6%. The stock doesn't have to deliver big gains for investors to enjoy great total returns. I think that buying Pfizer with its attractive valuation, solid growth prospects, and high dividend yield truly is a brilliant move.
Should you invest $1,000 in Axsome 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 has positions in Vertex Pharmaceuticals. The Motley Fool has positions in and recommends Axsome Therapeutics, CRISPR Therapeutics, Pfizer, and Vertex Pharmaceuticals. The Motley Fool has a disclosure policy.
