The Nasdaq Composite has plummeted 33% this year, but there are signs that for at least some stocks, brighter days could be on the horizon. Entering this week, three Nasdaq stocks were up 25% in just the past three months. Among the hottest buys of late are chipmaker Nvidia (NVDA -10.01%), and healthcare companies Biogen (BIIB 2.03%) and Gilead Sciences (GILD 0.91%).
What's behind their recent rallies, and are these stocks worth buying right now?
1. Nvidia
Semiconductor stock Nvidia has jumped around 25% through the past three months. The company released its latest earnings numbers on Nov. 16, and they weren't terribly impressive, with sales coming in at $5.9 billion for the period ending Oct. 30, a 17% decline year over year. Plus, profits of $680 million were a fraction of the $2.5 billion that Nvidia reported in the prior-year period.
The more likely catalyst for the stock's surge was a promising inflation reading in October that showed September's inflation rate at 8.2%, which was slightly better than the 8.3% that was reported a month earlier. Shortly after, shares of Nvidia began rallying and have continued to rise since then. Earlier this month, inflation numbers continued to show progress, with November's rate coming in even lower at 7.1%.
This is positive news since it signals that the economy could be improving. If inflation becomes less of an issue, that can help spur demand for personal computers, which in turn could mean stronger sales numbers and guidance for Nvidia.
At a whopping 71 times earnings, this isn't a cheap stock, but as noted above, profits have been nosediving due to a combination of rising prices and falling sales. A year or two down the road, hopefully, the economy will stabilize and stronger growth numbers return for Nvidia. There is still a chip shortage, and the company can be a key player in filling that demand.
If you're a long-term investor, now can be as good a time as any to buy the stock because its long-term prospects remain strong.
2. Biogen
There isn't much of a mystery behind the rapid rise of Biogen's stock. On Sept. 28, the company unveiled positive results surrounding a large clinical study of lecanemab, its Alzheimer's treatment that could potentially be what investors were hoping Aduhelm would be. With a reduction in cognitive decline of 27% compared to a placebo, the treatment shows lots of promise and has led to a lot of bullishness behind the stock.
Up 37% over the past three months, Biogen's stock has been among the hottest on the Nasdaq. There's hope that next year, the Food and Drug Administration (FDA) could potentially make a decision on lecanemab. And if it's successful, that could make Biogen an even hotter buy than it is right now.
At 15 times earnings, Biogen's stock hasn't become terribly overpriced despite its surge, and it's definitely not too late to buy the stock. But the big concern I'd have with investing in it right now is its volatility, and how quickly it can take off or crash depending on regulatory news.
Unless you have a strong risk tolerance and can stomach the inevitable rapid price movements, you might be better off putting Biogen on a watch list and waiting to see what happens, rather than placing an order for the healthcare stock. Sales have been declining in recent years, and this isn't as safe a stock as it once was.
3. Gilead Sciences
Gilead Sciences is another hot stock on this list. Its shares have jumped 32% in just three months, and it's now trading around its 52-week high. The company, which is known for its HIV medicines, reported strong earnings in late October, which catapulted the stock higher shortly afterward.
For its most recent quarter (ended Sept. 30), HIV treatment sales jumped by 7% to just under $4.5 billion. Sales from hepatitis C products also rose by 22% to $524 million. Oncology revenue of $578 million showed even more impressive year-over-year growth of 79%. Gilead's business has demonstrated some strong resiliency, and that has won over investors.
At 33 times earnings, the stock doesn't appear cheap. But its net income was recently weighed down by an acquisition-related expense that is nonrecurring.
And Gilead's stock could have a lot of room to rise with the FDA approving lenacapavir this week, a twice-yearly injection for HIV patients that could generate $4 billion in sales at its peak.
