Has all the recent market volatility -- most of it bearish -- motivated you to focus less on the near term and more on the long term? If so, you're not alone. This year's sizable pullback is a reminder that watching stocks fall on a near-daily basis is not only painful but can really mess with your head.
There is one upside to this massive corrective move, however. That is, some really great growth stocks have been dramatically devalued. If you can muster the guts and the cash to take the plunge, here are three dirt-cheap ones to think about picking up while they're down.
1. Meta
Yes, Meta Platforms (META 2.98%) is struggling with the downside of sheer size. Not only is Facebook's monthly user base seemingly peaking at just under 3 billion, but check-ins on WhatsApp and Instagram are also flattening. Revenue and earnings are fading accordingly. Its first-quarter per-share income fell from $3.30 to $2.72 -- one of the bigger year-over-year profit dips.
They're all signs that the organization may be running out of people willing and able to use its sites, although it's not a stretch to suggest society has become wearier of the toxic sides of these platforms. Whatever the reason, the stock's down 58% in less than a year. But the market's overlooking that Meta is fixing what's broken.
Take Tuesday's introduction of new monetization tools for Facebook and Instagram's content creators as an example. Not only does the company intend to directly pay creators more beginning in 2024 --democratizing quality content -- but it also plans to let a creator's subscribers on other platforms to connect via a Facebook group. The Reels Play platform will also open up to more participants, and Meta is even planning a Creator Marketplace allowing digital content makers to launch and market their personal content brands.
Higher-quality, better-curated content is just one aspect of Meta's revitalization plan, albeit an important one. Another is the recent reveal of its Crayta social world and game-building platform, moving the metaverse ball further downfield.
The world's always going to want a place to gather online. Meta is making smart moves that should help make it the preferred space, even if it takes time for these efforts to bear fruit.
2. Micron
It's become a predictable, almost tiresome cycle. Makers of computer memory -- DRAM as well as storage -- aren't making enough chips to satisfy demand. So all of them ramp up production, too much, ultimately undermining prices. They then put the brakes on output due to those low prices but do so too aggressively, only to crimp the needed supply. The limited supply results in soaring memory prices, which again encourages expanded production. You get the idea.
Even before the economic headwinds began blowing, DRAM prices were on a downcycle from their mid-2021 peak. Ditto for disk drives. That's really when shares of memory-chip maker Micron (MU 3.06%) began their 40% pullback that was only exacerbated by the tech market sell-off. If historical memory price trends hold, prices could fall further before they start to recover. That's going to keep working against Micron shares even though they're priced at a dirt-cheap six times this year's expected per-share earnings and less than five times next year's expected bottom line.
If you can take a step back and look past all the noise of the pricing cycle, however, you'll find that holding onto Micron stock is worth the wild swings. The company's revenue is four times its top line from just 10 years back, and its typical operating income has grown even more. Perhaps most important, Micron shares are worth nine times what they were worth a decade ago despite their recent pullback.
It's all evidence that the need for computer memory never stops growing, even if the industry still struggles to balance supply with demand. More to the point, investors who bought into this perpetually volatile trend on these stocks' dips have done very well, given enough time.
3. Incyte
Finally, add Incyte (INCY -0.52%) to your list of beaten-down stocks to tuck away in your portfolio.
Incyte is a biopharma company mostly focused on unmet medical needs. Its flagship drug Jakafi targets a specific form of bone cancer called myelofibrosis, though it's got a handful of other drugs in its portfolio and even more in its pipeline. Its recently launched eczema treatment Opzelura, generated nearly $13 million worth of revenue for the quarter ending in March. That's a solid start for a new product in a small but competitive market.
It's not every investor's cup of tea. Jakafi is Incyte's only real breadwinner, generating on the order of $2 billion worth of annual sales. While it's an effective treatment for its approved uses, those indications are largely limited to patients with a somewhat rare condition who didn't respond well to first-line treatments. In the same sense that a stock portfolio should be diversified across several sectors, a drug company's portfolio would also -- ideally -- be diversified.
For investors who can stomach above-average risk, this stock's two-year, 30% slide is a chance to plug into a fast-growing company while shares are priced at only 23 times this year's expected earnings. The coming year's projected 15% sales growth to be led by Jakafi will likely improve per-share profits by more than 40%, translating into a forward-looking price-to-earnings ratio of only 16.
Yet, that's still just the beginning.
Although it may be something of a one-trick pony right now, it would be a smart horse to bet on. The company believes Jakafi could grow into a $3 billion franchise before peaking. That's 50% sales growth that will likely lead to significantly more earnings growth. In the meantime, Incyte has 10 different pivotal drug trials underway, setting the stage for more near-term product launches, and another 19 trials in a "proof of concept" stage that could become revenue-bearing products within a matter of years. The market just isn't factoring in the potential of this company's pipeline or Jakafi itself.
