Though the S&P 500 dipped earlier this month, it's important to keep in mind that we're still in a very positive market environment. The bull market is going strong, with the benchmark rising 17% so far this year. And since bull phases generally last longer than bear ones, it's possible that the good times will keep on rolling.
How can you benefit? By scooping up a few players that haven't yet picked up momentum but have the potential to do so. Two great examples are biotech Moderna(NASDAQ: MRNA) and pharma giant Pfizer(NYSE: PFE). They both soared early in the pandemic thanks to their top-selling vaccines, then suffered as that market lost steam. But there's more to these companies than just one product. Motley Fool contributors Adria Cimino and Keith Speights discuss these two high-potential stocks, both down more than 50% from their peaks, and why they're worth buying right now.
Image source: Getty Images.
Moderna's pipeline strength
Adria Cimino (Moderna): Moderna's coronavirus vaccine really put this biotech player on the map. The company brought its messenger RNA vaccine from drawing board to market in about nine months and went on to generate billions of dollars in revenue and profit. This helped the company's stock and market value to explode a few years ago.
But as vaccine demand declined, so did demand for Moderna stock. The shares have dropped more than 80% from their high in 2021, and this year they're down almost 30%. But I see this as a buying opportunity, and here's why.
First, it's clear Moderna's coronavirus vaccine revenue won't reach the levels we saw during the worst of the pandemic -- those were exceptional times. But the vaccine still represents potential for blockbuster annual revenue, especially if Moderna brings its combined coronavirus/flu vaccine candidate to market. That candidate performed well in its phase 3 trials, so it's approaching the finish line.
Second, Moderna's future isn't tied to just one product. The company recently won approval for its respiratory syncytial virus (RSV) vaccine, and it has cytomegalovirus (CMV) and personalized cancer vaccine candidates in phase 3 trials. Moderna also has dozens of other investigational drugs in the pipeline. Many of these other candidates are in phase 2 trials, so the company has the potential to introduce several new treatments in the not-too-distant future if all goes well in these studies.
In fact, Moderna has said it aims to launch as many as 15 new products during the next five years. Even if the company makes it halfway to that goal, we could expect significant growth to follow.
Of course, Moderna shares probably won't take off overnight. Investors may want to see how the company fares in this fall's vaccine market -- Moderna is now selling both its coronavirus vaccine and the newly approved RSV vaccine -- and it may even wait to hear about the next steps for current phase 3 candidates. But considering the strength of its pipeline, Moderna has what it takes to be a winner when it comes to revenue growth down the road. That's why, right now, when the stock is down, is the perfect time to pick it up and wait.
A big pharma stock poised for a big comeback
Keith Speights (Pfizer): I fully understand why many investors may have written off Pfizer. The stock is down roughly 50% from its peak set in late 2021. Pfizer's shares declined in both 2023 and 2024 while the overall market rose.
This dismal performance happened for two simple reasons. First, Pfizer's revenue and earnings dropped in lockstep with the sinking sales of its COVID-19 products. Second, the company faces patent expirations for several of its top drugs during the next few years.
However, I think Pfizer is a big pharma stock poised for a big comeback. The company's management predicts solid growth in the second half of this decade. The optimism is justified, in my opinion.
Although I don't expect Pfizer's COVID-19 revenue to ever return to the lofty levels of 2021 and 2022, the worst should now be over. What about those looming patent expirations? They won't magically disappear. But Pfizer has prepared for them in part by making smart acquisitions. Business development deals alone should generate enough additional revenue to more than offset the negative effect of the loss of patent protection.
Pfizer has also invested heavily in internal research and development. As a result, it has a strong pipeline of promising candidates that could be big winners in a few years. I rank the company's oral obesity drug danuglipron high on the list.
Admittedly, Pfizer probably won't be a favorite for growth investors even with its improving prospects. However, value investors should like Pfizer's forward earnings multiple of 10.6. And income investors should absolutely love the company's forward dividend yield of 5.7%.
Two players with long-term potential
Moderna and Pfizer both benefited from their coronavirus vaccine strength, then lost their luster in recent years as that revenue slipped. But it's worth giving these players a second look. They each have the potential for sales gains over the long term, and today you can pick them up for a bargain. They may even gain momentum as this bull market story enters its next chapters.
Should you invest $1,000 in Moderna right now?
Before you buy stock in Moderna, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Moderna wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $716,375!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. TheStock Advisorservice has more than quadrupled the return of S&P 500 since 2002*.
Adria Cimino has no position in any of the stocks mentioned. Keith Speights has positions in Pfizer. The Motley Fool has positions in and recommends Pfizer. The Motley Fool recommends Moderna. The Motley Fool has a disclosure policy.
