Last year’s difficult markets meant many stocks struggled – even those with bright future prospects. That’s why you shouldn’t turn away thinking that all these players have problems. Instead, you should look at stocks individually. And if you do this, you’ll be more likely to spot big buy opportunities today, as well as identify stocks to avoid.
Buying an opportunity means stocks that currently look very cheap given their potential future gains. Stocks to avoid are stocks 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 the two stocks he’s struggling to hand over right now and the one he should avoid like the plague.
Stocks to buy: Teladoc Health
Teladoc Health (TDOC 6.47%) It dropped 74% last year, and for one specific reason. The telemedicine giant reported a $2 billion non-cash goodwill impairment charge, both related to its acquisition of chronic disease specialist Livongo.
Investors are eager to turn the company’s growing earnings into profitability. But after announcing the impairment claim, that goal seemed even further away.
But in Q3, Teladoc gave us reason to be optimistic. The company reported no further impairment charges and its net loss narrowed. At the same time, Teladoc continues his double-digit growth in revenue and visits. The situation looks bright even for the whole year. The company recently raised its full-year earnings forecast.
Teladoc is an industry leader with double-digit growth. And buying Livongo should pay off in the end. Nearly half of all Americans suffer from at least one chronic disease. All of this means that Teladoc, which is trading at its lowest ever multiple, looks like a steal for now.
Stock to buy: Moderna
Moderna (mRNA -2.01%) The stock has fallen in 2022, but has risen so far this year, and for good reason. The company provided positive news about the potential of the coronavirus vaccine market post-pandemic. Moderna has also advanced late-stage programs in its pipeline.
Let’s take a quick look here. Moderna expects the post-pandemic vaccine market to grow from $12 billion to $24 billion. The company also talked about charging up to $130 for the vaccine. Up from about $25 today. So it’s clear that Moderna has the potential to generate continued blockbuster revenue from its annual coronavirus boosters – even if demand is much lower than it was early in the pandemic.
At the same time, Moderna may launch additional products. The company aims to bring influenza and respiratory syncytial virus vaccines to market within the next few years. These represent a multi-billion dollar market.
This biotechnology has a total of 48 programs in development across many therapeutic areas. Even a handful of successes can lead to big profits down the road. All this means that Moderna’s coming-of-age story is just beginning. And now it’s time to get on board.
Stock to Avoid: Ocugen
Ocugen (OCGN 5.83%) Stocks surged early in the pandemic on hopes that a coronavirus vaccine would hit the market. The company has the US and Canadian commercial rights to his Covaxin, which was developed by his Bharat Biotech in India. The problem is that these countries have not yet approved Covaxin. As such, Ocugen does not generate vaccine revenue.
And even if the US and Canada approve covacine in the future, it will not be easy for latecomers to carve out market share in a post-pandemic world.
But what about the rest of the pipeline? Ocugen has expanded its focus from gene therapy to treat eye diseases to include assets acquired as part of a reverse merger with Histogenics in 2019. That is NeoCart for knee cartilage lesion repair.
In Histogenics, NeoCart did not meet its primary endpoint in a Phase 3 trial. However, other results were convincing. Therefore, NeoCart and Ocugen could be successful in the upcoming new Phase 3 trials. The eye disease candidate is still in the early stages of development.
R&D costs are rising to support these programs. It more than doubled year-over-year in the third quarter. At the same time, Ocugen’s path to profitability is unclear. So at the moment, Ocugen is at the top of my “stocks to avoid” list.
Adria Cimino has no positions in any of the mentioned stocks. The Motley Fool holds positions in and recommends Teladoc Health. The Motley Fool recommends Moderna stock. The Motley Fool’s U.S. headquarters has a disclosure policy.
