Buy on the dip. You've no doubt heard the expression plenty of times in the past. Granted, some stocks aren't good candidates to buy when they've pulled back. However, you can also often make a lot of money over the long run by buying the right beaten-down stocks.
Three Motley Fool contributors were asked to identify great growth stocks down 20% or more to buy now. Here's why they chose Beam Therapeutics (BEAM +4.11%), Maravai LifeSciences (MRVI 3.53%), and Novavax (NVAX 0.10%).
A potential multibagger
Keith Speights (Beam Therapeutics): Beam Therapeutics was flying high in the early part of 2021. Then the bottom fell out for it and many other biotech stocks. Beam is now down nearly 70% below its previous peak. However, I think that Beam is poised for a huge rebound.
NASDAQ: BEAM
Key Data Points
The company is the leader in developing base-editing therapies. Base editing is a highly precise type of gene editing that enables a specific DNA base pair to be changed.
Beam is still only in its early innings. The company is currently evaluating one experimental base-editing therapy, BEAM-101, in phase 1/2 clinical testing as a potential treatment for sickle cell disease. It expects to advance another program, BEAM-201, targeting relapsed/refractory T-cell acute lymphoblastic leukemia and T-cell lymphoblastic lymphoma into early-stage testing by mid-2023.
More base-editing therapies could be on the way. Beam expects to file for regulatory approval by late 2023 or early 2024 to advance BEAM-301 into clinical studies in treating glycogen storage disease 1a. It also hopes to submit for approval by early 2024 to begin clinical testing of BEAM-302 in treating alpha-1 antitrypsin deficiency.
To be sure, Beam is a risky stock that won't be suitable for all investors. However, for aggressive investors willing to take on considerable risk and who have the patience to wait several years, I think Beam has the potential to be a multibagger.
Profiting as more mRNA products emerge
David Jagielski (Maravai LifeSciences): In the past year, shares of biotech company Maravai LifeSciences have nosedived more than 40%. Today, the stock trades near its 52-week low of $12.16 and makes for an appealing contrarian investment, especially given its low valuation of just $3.5 billion.
NASDAQ: MRVI
Key Data Points
Maravai assists with the development of messenger RNA (mRNA) vaccines and therapeutics, with its CleanCap capping technology being a key part of its business. Two of its largest customers are COVID-19 vaccine makers Pfizer and BioNTech, which for the first nine months of 2022 accounted for 37% and 30%, respectively, of the company's revenue.
Although demand for COVID-19 vaccines and boosters is likely to decline this year, mRNA still presents an attractive growth opportunity. Earlier this month, Moderna announced positive results from the phase 3 trials of an mRNA-based vaccine, this time for the respiratory syncytial virus (RSV).
Companies are paying more attention to mRNA given how successful COVID vaccines have been, and that could lead to stronger revenue growth for Maravai in the future. And at such a low share price, it may even make for an attractive acquisition target for one of the large healthcare companies that are involved with mRNA.
Maravai is a bit of an underrated stock. While it is involved in mRNA, the company doesn't get the same fanfare that other big names get. But the business is profitable. Maravai generates positive free cash flow. If you're bullish on mRNA technology, this is definitely a stock you'll want to consider adding to your portfolio right now.
A deeply discounted biotech stock
Prosper Junior Bakiny (Novavax): Last year, Novavax took a beating along with many other coronavirus-focused biotechs. The worst of the pandemic seems to be in the rearview mirror. There will likely be less need for vaccines like Novavax's Nuvaxovid starting this year. It's not surprising that investors were quick to offload the company's shares.
NASDAQ: NVAX
Key Data Points
But the sell-off has gone a bit too far, in my view. At current levels, Novavax looks like a solid buy. The company's market capitalization stands below $930 million as of this writing. For a company that will report about $2 billion in revenue for the fiscal year 2022, that's not bad at all.
Also, even if vaccine sales fall across the board, COVID-19 won't simply disappear. People will likely continue to seek to get vaccinated on a seasonal basis. Nuvaxovid has earned approval or authorization in dozens of countries, including as a booster option. If Novavax generates even half a billion in sales from its vaccine in 2023, that would be a win considering its size.
But analysts expect the company will rack up sales of $1.31 billion this year. Novavax estimates an $18 billion worldwide opportunity in the coronavirus vaccine market by 2025. Sure, that's substantially lower than what it has been in the past two years. However, it's much larger than the flu vaccine market, which was worth an estimated $6 billion in 2022.
Novavax is also working on a combined COVID/flu vaccine that recently started a phase 2 study. In addition, its pipeline includes a stand-alone flu vaccine that delivered positive results in a late-stage study in 2020. These candidates should allow Novavax to expand its lineup in the next few years.
I don't think that Novavax has achieved its potential yet. It's a growth stock that investors should seriously consider buying in 2023, in my view.
