Biotech investing is not for impatient investors. So why is it attractive to some investors? Ernest Hemingway penned the line “gradually, then suddenly,” referring to how someone goes bankrupt. But it could also apply to the reason why many investors look for biotech stocks to buy.
The results could take years to prove out, but when they do these stocks can make sharp, outsized moves. And these investors want to make sure they’re in the stock when that spike happens.
However, biotech investors aren’t just throwing a dart at these stocks. They’re looking at things like the company’s pipeline and the likelihood of those drugs being approved. And even if you’re not an expert on the science, investors can look at analyst ratings to get a feel for the consensus opinion on the company’s outlook.
In 2024, there are areas such as gene editing, precision medicine, and breakthroughs in oncology which represent potential opportunities for investors. That’s because many biotech stocks that are working on drugs in these areas and others are still in a bear market. With that in mind, here are three biotech stocks to buy that look promising on their current dip.
This isn’t the first time I’ve recommended Pfizer (NYSE:PFE) in a group of biotech stocks to buy. However, I’ll admit, at face value this is a tough sell to investors. PFE stock is down over 38% in the last 12 months. And the stock has given up any gains it made from a weak rally in December 2023.
More tellingly, Pfizer stock is down 33.75% in the last five years. That means for long-term investors, it’s almost like the entire bounce the company received from its COVID-19 vaccines and therapeutics never happened.
Almost. The company has continued to issue, and increase, its dividend in each of the last 14 years. That dividend currently has a yield of 6.24%.
But a dividend alone isn’t enough reason to buy PFE stock. Fortunately, 2024 looks like it’s going to be a much better year for Pfizer as it focuses on new oncology drugs after its acquisition of Seagen (NASDAQ:SEGN). The company is also pivoting into the emerging area of precision medicine.
This is a long-term hold. But with Pfizer expecting earnings to increase by 24% there is growth that isn’t priced in. Plus, the price-to-earnings (P/E) ratio of 12x is a slight discount to the company’s median P/E ratio over the last five years. But it’s a significant discount to the sector average of around 31.4x.
Beam Therapeutics (BEAM)
Beam Therapeutics (NASDAQ:BEAM) is a biotech company that is focused on the emerging field of gene editing. Specifically, Beam uses a proprietary base editing technology that focuses on correcting point mutations in a patient’s “base” DNA. According to Beam, about 60% of “the human disease-causing variants described in a mutation database” are point mutations.
Beam’s lead gene editing candidates focus on sickle cell disease and beta thalassemia. These candidates are still years away from being commercially approved. That’s the bad news. The good news is that the company has approximately $1.2 billion dollars on its balance sheet.
That’s uncommon for a biotech company and should be enough to fund the company through 2027. By that time, the company is likely to have one or more candidates in market.
If you’re looking for another good reason to take a long position in BEAM stock, analyst opinion is bullish. The consensus price target of 13 analysts gives the stock an upside of more than 75%.
Jazz Pharmaceuticals (JAZZ)
Jazz Pharmaceuticals (NASDAQ:JAZZ) makes this list of biotech stocks to buy on the dip because of its commercially available drugs as well as its deep pipeline. The company generated over $3.6 billion in revenue in 2022 and is on pace to eclipse that number in 2023. Investors will learn more when the company reports earnings on March 6.
The company also has a pipeline that includes targeted oncology products which it expects to receive approval on before 2030. In the meantime, the revenue that’s currently coming in the door has the company on pace to meet its Vision 25 mission of generating $5 billion by 2025.
The point I made in Sept. 2023 is that the company’s growth doesn’t seem to be reflected in the JAZZ stock price which is down 21% in the last 12 months. But the consensus price target of analysts is $186.25, an increase of more than 51%. And 14 out of 18 analysts give the stock a Strong Buy or Buy rating.
On the date of publication, Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.