A look at the facts will often reveal businesses that are poised for future growth and/or show no signs of slowing down. The stocks for these types of businesses tend to be particularly valuable to hold on to, especially when a bear market wreaks havoc and temporarily pushes valuations lower.
A couple of unstoppable growth stocks -- Pfizer (PFE -0.19%) and Amazon (AMZN -1.64%) -- are currently trading around multiyear low valuations and savvy investors might want to consider buying while the opportunity presents itself. Here's why.
1. Pfizer
Pfizer is a healthcare company on a mission. It's acquiring companies in preparation for some inevitable changes that are coming for its business. It needs to replace what will likely be a slowdown in revenue from its COVID-19 vaccine Comirnaty and symptom-treatment pill Paxlovid. It also needs to combat some patent expirations in a few of its top-selling drugs.
Last month Pfizer announced it was buying cancer drug specialist Seagen for $43 billion. It has the potential to transform Pfizer's business and make oncology a bigger growth opportunity, but it also may not be the last deal that the company will pursue this year.
Pfizer's management projects its M&A and pipeline efforts will add $25 billion in new revenue by 2030. This should help offset projected losses in revenue that could top $18 billion by 2030 as patents on key drugs expire.
One area of significant growth potential is in the further development of mRNA vaccines. The company expects that by the end of the decade, that portfolio could be bringing in up to $15 billion in annual sales. That's nowhere near the nearly $57 billion it generated from Comirnaty and Paxlovid last year, but pandemics you have treatments for don't happen all that often.
Pfizer is currently a cash-rich business with more than $22 billion in short-term investments on its books. It was also generating around $10 billion in free cash flow before the pandemic. All that cash ensures Pfizer has plenty of resources at its disposal to invest in other businesses or its own operations and fund new growth opportunities.
Short-term investors are focused on the pandemic treatment revenue losses and the discounted stock price reflects that. Pfizer stock is trading near its 52-week low. It's also trading at valuation levels last seen a few years ago.
Long-term investors buying in now should be prepared for short-term pain for the reasons cited above. But buying the stock now while it remains at a relatively modest forward price-to-earnings (P/E) multiple of 12 could prove to be a steal of a deal a few years down the road, as the average healthcare stock right now trades at 18 times its future earnings.
2. Amazon
Macroeconomic concerns about the economy as well as more specific concerns about the tech sector help to explain why Amazon's stock is trading down significantly, giving back all of its gains made during the pandemic. But those drops could turn Amazon stock into a bargain buy as well. The shift to e-commerce and companies offering greater delivery options that accelerated during the pandemic is likely here to stay.
According to a report from Block, which makes the Square terminals that retailers often use to easily accept credit and debit card payments, "Retailers now sell their goods on an average of four different channels, and more than 80% plan to expand the number of digital channels on which they sell over the next 12 months." Block's 2023 Future of Commerce Report also found that "23% of consumers say they won't patronize a business that doesn't offer online options."
This all bodes well for Amazon because it reinforces the idea that e-commerce isn't going back to how it was before the pandemic. Many vendors started selling their products on Amazon in order to gain an online presence. Demand for more convenient online options and selling more goods digitally will remain a priority for both retailers and consumers. According to estimates from Meticulous Research, the e-commerce market will grow at a compounded annual growth rate of 16.9% through the end of the decade.
Amazon hit a short-term rough patch because it overhired and overestimated demand. The changes it's making this year should result in a leaner, more profitable e-commerce business. For the first three months of 2023, the company projects its sales to grow between 4% and 8%.
That growth rate is a reflection of the negative impact of outsized inflation, unfavorable foreign exchange rates, and consumers scaling back spending amid worries of a possible recession. As those concerns and issues inevitably ease and the economy returns to normal, Amazon will get back to generating stronger growth numbers. This is why Amazon stock makes for a great long-term buy today.
