Growth stocks are known for their focus on increasing revenue in leaps and bounds. That's why investors turn to them when they want to rev up their portfolio's growth potential. But these stocks don't always deliver. For example, they're often the first to suffer in a market downturn. That's what happened last year.
But here's the good news. These periods of underperformance don't last forever. And they offer you the opportunity to pick up these top companies at a bargain price. All of this means right now is the perfect time to buy growth stocks. Let's take a look at three cheap ones that could supercharge your portfolio -- possibly right away and for the long term.
1. CRISPR Therapeutics
CRISPR Therapeutics (CRSP 1.42%) slid 46% last year. Ironically, this loss came at a time when things were going extremely well for the biotech company. In fact, CRISPR now has reached its most exciting moment ever: The company, with partner Vertex Pharmaceuticals, recency submitted exa-cel, its first product candidate, to regulators in the U.K., Europe, and the U.S.
Exa-cel is designed as a one-time curative treatment for blood disorders beta thalassemia and sickle cell disease. It uses CRISPR's gene editing technology, which "corrects" faulty genes involved in disease.
This is a major step for CRISPR for two reasons. First, an approval would validate the company's technology -- a technology it uses in other pipeline candidates. This clearly could boost investors' confidence in the company's ability to bring multiple products to market.
Second, an approval would lead to the company's first product revenue. From that point, CRISPR's growth could really take off.
CRISPR has fallen more than 70% from its peak back in 2021 -- a time when we had much less visibility regarding potential products. Considering exa-cel's prospects and the rest of CRISPR's pipeline, the stock looks dirt cheap today.
2. Etsy
Etsy (ETSY 1.59%) offers makers of handmade items a place to set up shop and sell their wares online -- and we, as buyers, go to the Etsy website to find them. Like other e-commerce businesses, Etsy has faced headwinds linked to the economy. For instance, higher inflation means shoppers have less money to spend.
Still, Etsy's capital light business model means it's less sensitive to rising inflation than other companies. And that's helped Etsy increase its cash from operations over time.
ETSY Cash from Operations (Annual) data by YCharts
Sales already were on the rise at Etsy prior to the pandemic. But lockdowns pushed people to favor e-commerce -- and Etsy got an extra lift. What's great is Etsy has kept those gains, even in today's difficult economic environment.
For example, Etsy marketplace's gross merchandise sales in the third quarter of last year reached $2.6 billion, up from $1.1 billion in the same quarter three years ago. The number of buyers, how much they spend, and how frequently they shop at Etsy all are on the rise. And, importantly, habitual buyers have increased more than 200% since the third quarter of 2019.
Etsy trades for 33 times forward earnings estimates -- down from more than 60 about a year ago. This bargain price may be a thing of the past once the economy picks up.
3. Novavax
Novavax (NVAX 5.26%) soared more than 2,700% in the early days of the health crisis as investors bet on its coronavirus vaccine candidate. But the stock since has crashed, falling back to its pre-pandemic level. This looks dirt cheap if Novavax can score a win with its next coronavirus candidate.
First, though, let's look at what happened. Novavax's vaccine arrived to market late -- well after the initial wave of demand as the entire world sought out vaccination. The company still has benefited though. Prior to this vaccine, Novavax didn't have a product on the market. So, it quickly went from zero product revenue to revenue in the hundreds of millions of dollars.
As we head toward a post-pandemic situation, it's unlikely Novavax's vaccine will carve out major market share and unseat bigger rivals Pfizer and Moderna. But, farther down the road, Novavax may win with a potential combined coronavirus/flu vaccine.
The company recently initiated a phase 2 trial of the combined candidate. Since Novavax has brought a coronavirus vaccine and a flu candidate -- NanoFlu back in early 2020 -- successfully through phase 3 trials, it has the expertise to handle such a project. And it's a bit farther ahead from a timeline perspective than Moderna, which also is working on a combined vaccine.
Novavax is risky right now and best left to the most aggressive of investors. But if Novavax's combined vaccine candidate is successful down the road, the stock eventually could skyrocket -- and supercharge investors' portfolios.
