Are you getting a little nervous about sinking stock market indices? October is shaping up to be even spookier than September, but that's no reason to stop investing.
In fact, now's a great time to buy some formerly high-flying growth stocks that have sunk to bargain-bin prices. For all three companies on this list, the average Wall Street analyst target at the moment suggests a gain of 50% or better down the road.
Image source: Getty Images.
1. SoFi Technologies
SoFi Technologies (SOFI 0.26%) shares are down around 37% since the stock peaked this February. Investment bank analysts who follow the stock think it can bounce back and keep climbing even further. The consensus price target for the scrappy young fintech is 52% higher than its price now.
Shares of SoFi climbed early this year after Chamath Palihapitiya took the online lender public with a SPAC merger. Then the stock tanked this summer after lockup provisions expired and early investors cashed out.
Established fintech businesses such as PayPal and Square are so much larger than SoFi that it's easy to see why SoFi's early investors were eager to take some profits. Consumer product demand is growing so fast they could regret their decision in another couple of years. Total membership more than doubled year over year in the second quarter to 2.6 million. The number of SoFi products those members are using rose even faster to reach 3.7 million at the end of June.
In 2020, SoFi acquired Galileo, an application programming interface (API) provider that helps smaller businesses build their own digital financial products, issue credit cards, and collect payments. In the second quarter, the number of clients using Galileo more than doubled to 79 million. At this pace, it's just a matter of time before SoFi gets large enough to make PayPal and Square nervous.
Image source: Getty Images.
2. Invitae
Invitae (NVTA -72.22%) shares are down more than 50% from a peak they reached this February. Analysts who follow the medical genomics company are expecting a speedy return to previous heights. The consensus price target for Invitae right now represents a 53% premium.
Invitae stock might seem expensive by standard valuation metrics, but they don't tell the whole story. The business is barely breaking even now so earnings multiples aren't particularly useful.
As a multiple of top-line revenue, though, Invitae's looks attractively priced. The stock is trading at around 11.9 times this year's revenue projections. Profitability has been an issue in the past, but Invitae's gross profit of $41.2 million in the second quarter worked out to an encouraging 35% of top-line sales.
Invitae's solution for a fragmented genetic testing market is resonating with healthcare providers and patients. That's because the company offers a single comprehensive test that's relatively inexpensive. Topline sales rose 152% year over year and the number of billable tests performed climbed 154% during the three months ended June.
In addition to providers and patients, Invitae keeps attracting new partners from the biopharmaceutical industry. That's because innovative new drugs are increasingly likely to have a genetic component.
Getting insurers and governments to pay for testing that might reveal eligible new patients is always an uphill battle when drugmakers try launching pricey, targeted treatments. In the second quarter, Invitae signed 43 partnership deals with biopharmaceutical companies. Many of them could end up paying for Invitae to look for people that can benefit from their drugs.
Image source: Getty Images.
3. Renalytix
Renalytix (RNLX -9.11%) shares are down about 40% from a peak they reached this summer. The average analyst on Wall Street is expecting it to come surging back. The consensus price target for Renalytix suggests the stock is around 59% undervalued at the moment.
This stock has been beaten up recently because the contentious Medicare Coverage of Innovative Technology rule has been indefinitely postponed. That means it will take longer than expected for Renalytix to receive a National Coverage Determination (NCD) that smoothes out the reimbursement process. Looking ahead, Renalytix probably won't have a hard time getting an NCD for KidneyIntelX, if it receives clearance from the FDA.
Overall costs to Medicare from people with chronic kidney disease (CKD) reached $81.8 billion in 2018. That works out to $23,700 per person and the costs keep rising. By helping doctors make better treatment decisions for those in early stages, $950 KidneyIntelX tests more than pay for themselves.
