Last year’s tough market meant many stocks struggled – even those with good prospects for the future. That’s why we shouldn’t consider all these players problematic and turn our backs on them. Instead, we need to look at stocks individually. And if we do that, we’ll likely find great buying opportunities today — and identify stocks to avoid, too.
By buying opportunities, I mean stocks that look cheap as hell right now, considering the potential gains going forward. Stocks to avoid are those that do not yet have a clear path to growth. There are many examples of both in the healthcare world. So let’s check out two struggling stocks to buy right away and one to avoid like the plague.
Stock to buy: Teladoc Health
Teladoc Health (TDOC 6.47%) sank 74% last year – and for one particular reason. The telemedicine giant reported $2 billion in non-cash goodwill impairment charges. Both were linked to the acquisition of chronic care specialist Livongo.
Investors are eager for the company to transform growing revenue into profitability. But after announcing the impairment charges, that goal seemed even further away.
In the third quarter, however, Teladoc gave us reason to be optimistic. The company did not record additional impairment charges and its net loss narrowed. At the same time, Teladoc continues to report double-digit growth in revenue and visits. Things look good for the full year, too: The company recently raised its full-year revenue forecast.
Teladoc is a leader in an industry that is growing by double digits. And the Livongo purchase should eventually pay off—nearly half of Americans suffer from at least one chronic disease. All of which means that Teladoc, trading at its lowest-ever sales multiple, looks like a steal right now.
Stock to buy: Moderna
Modern (MRNA -2.01%) stocks dipped in 2022, but they’re up so far this year, and for good reason. The company gave us positive news about the potential post-pandemic coronavirus vaccine market. And Moderna has made progress in advancing late-stage programs in the pipeline.
Here’s a quick look. Moderna expects a post-pandemic vaccine market in the range of $12 billion to $24 billion. The company is also talking about charging up to $130 for its vaccine; it’s from about $25 today. So it’s clear that Moderna can generate recurring revenue hits from annual coronavirus boosters — even if demand is much lower than it was earlier in the pandemic.
At the same time, Moderna may launch additional products. The company aims to market its influenza and respiratory syncytial virus vaccines in the next few years; they represent billion dollar markets.
The biotech has a total of 48 programs in development across many therapeutic areas. If even a handful are successful, we can expect big profits in the future. All of this means that Moderna’s growth story may just be beginning. And now is the time to get involved.
Stock to avoid: Ocugen
okugen (OCGN 5.83%) jumped earlier in the pandemic in hopes of bringing a coronavirus vaccine to market. The company has rights to commercialize Covaxin in the US and Canada, developed by India’s Bharat Biotech. The problem is that those countries haven’t yet approved Covaxin — so Ocugen isn’t generating vaccine revenue.
And even if the U.S. and Canada allow Covaxin in the future, it won’t be easy for the latecomer to gain market share in a potentially post-pandemic world.
But what about the rest of the pipeline? Ocugen has expanded its focus from gene therapies to treat eye diseases to include an asset it acquired as part of its reverse merger with Histogenics in 2019. It’s NeoCart for repairing knee cartilage lesions.
In Histogenics, NeoCart missed the primary endpoint of its phase 3 trial. However, other results were compelling. So NeoCart — and Ocugen — could potentially succeed in an upcoming new phase 3 trial. As for the eye disease candidates, they remain in earlier stages of development.
To support these programs, research and development costs are increasing; they more than doubled year-on-year in the third quarter. At the same time, Ocugen’s path to revenue is unclear. So, Ocugen is currently at the top of my “stocks to avoid” list.
Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions and recommends Teladoc Health. The Motley Fool recommends Moderna. The Motley Fool has a disclosure policy.