This year's stock market rally has left some potential winners behind, and that represents great opportunity for you to buy them for a bargain. Of course, it's not always easy to get excited about stocks that have declined. But it's important to set aside the recent stock performance and instead focus on the company's long-term earnings prospects. If the future looks bright, you may have found a player that could seriously boost your portfolio down the road.
Today, Moderna (MRNA 1.69%) and Doximity (DOCS 0.97%) both fit the bill. Moderna is known for its coronavirus vaccine, but it may not be a one-product company for long. The biotech aims to launch as many as 15 products in just a few years. Doximity is a platform that helps doctors connect and save time -- and the company has grown by leaps and bounds. Both Moderna and Doximity, down double digits this year, are screaming buys right now. Let's check them out.
1. Moderna
Investors once saw Moderna's coronavirus vaccine as a reason to buy the stock, but in recent times, they've seen it as a reason to sell. That's because they've worried about the company's dependence on just one product -- especially a product linked to a pandemic situation.
But here's why we should view Moderna differently. First, even though vaccine demand has declined, it's not going to zero. Moderna has predicted the coronavirus vaccine market will follow that of the flu vaccine market, and if that happens, about half of Americans will go for an annual shot. That should result in recurrent blockbuster revenue for Moderna.
And there's an even bigger reason to be optimistic about Moderna right now. As mentioned above, the company plans on launching up to 15 products in the coming five years. What does this mean financially? Moderna predicts these new products could result in as much as $30 billion in revenue. This well surpasses its coronavirus peak sales of $18.4 billion.
The risk of candidate failure always is possible in the world of biotech and pharma, but even if Moderna succeeds with only a handful of these investigational products, the company's earnings could take off. Meanwhile, Moderna also has been investing in artificial intelligence (AI), a tool that could help its product development become faster and more precise.
Today, Moderna shares trade for about 8.5 times forward earnings estimates, dirt cheap considering the company's future earnings opportunities. And that's why this biotech player is a screaming buy.
2. Doximity
Doximity is an online platform that allows doctors to easily find and get in touch with colleagues, share research, and even conduct virtual medical visits right from their personal phone -- without sharing their number with patients. It's no surprise that 80% of U.S. doctors are members.
The company doesn't rely on doctors for revenue, however. (Most services are free to them, but doctors can upgrade to a telemedicine service with more features. And Doximity offers paid plans for large practices and clinics.) The company's main revenue source is the advertising opportunity it sells to pharmaceutical companies and hospital systems so that they may reach their target audience: doctors. Doximity's clients include the top 20 pharma companies and the top 20 hospitals.
This business model has helped Doximity grow its earnings over time, as you can see in the chart below.
DOCS Revenue (Annual) data by YCharts
Doximity continued to grow important metrics such as revenue, operating cash flow, and free cash flow in the double digits in the most recent quarter, but the company has noted a slowdown as pharma companies have tightened their budgets. As a result, it lowered its annual revenue and EBITDA guidance by around 8% to 9%.
But here's why there's reason to snap up Doximity shares now. The difficult economy is a temporary situation, Doximity has a roster of top clients, and the company is taking steps to adapt its offer to the needs of clients and doctors. For example, it's launched a self-serve ad platform for clients and has released a ChatGPT-style writing tool -- DocsGPT -- for doctors.
So, today, trading at 26 times forward earnings estimates -- around its lowest in two years -- Doximity looks like a steal.
