It's a lot easier to convince yourself to buy a stock when it's flying high than when it's in the doldrums. You can see the momentum and imagine it continuing. But when a stock is stagnating or falling -- as long as the company has solid long-term prospects -- those are actually the best times to get in on the story. So take a second look at the market's recent laggards -- some may offer great buying opportunities.
That's the case for gene-editing specialist CRISPR Therapeutics (CRSP 0.34%) and e-commerce niche player Etsy (ETSY 0.34%). Both offer fantastic growth prospects -- yet their shares today aren't reflecting this potential.
1. CRISPR Therapeutics
CRISPR Therapeutics shares have declined 80% from the high point they reached back in 2021, and this year, they're little changed. At the same time, the company is heading toward its biggest moment yet. The Food and Drug Administration (FDA) is set to decide whether to approve what would be the biotech's first commercialized product.
The FDA will rule in December on exa-cel as a treatment for sickle cell disease, and in March on it as a treatment for beta-thalassemia. Treatment options are limited today for both of these blood disorders, so exa-cel, which was designed to provide a one-time functional cure for them, could attract doctors and patients -- and bring in blockbuster revenue.
Exa-cel uses CRISPR Therapeutics' gene editing technology, which aims to fix the faulty genes responsible for disease. And the company applies this technique to candidates throughout its pipeline. So an exa-cel regulatory win would be a positive sign for all of CRISPR Therapeutics' programs.
And speaking of other programs, the company's immuno-oncology candidate, CTX-110, may be next to reach the finish line. The biotech is testing it in a phase 2 study that could support a regulatory request.
Finally, CRISPR Therapeutics may generate more revenue by licensing out its gene editing technology -- it has already done this by licensing it to Vertex Pharmaceuticals for that company's type 1 diabetes program, and has brought in $170 million in payments so far.
All of this means CRISPR Therapeutics may be in the early days of its growth story, a perfect time to get in.
2. Etsy
You likely know of Etsy if you've ever shopped online searching for a unique gift. The company offers a platform for sellers of handmade, artisan, and vintage items to connect with buyers.
One of the great things about Etsy's business is that it is capital light, meaning Etsy doesn't have to make major investments to spur growth. For example, Etsy doesn't invest in infrastructure for the storage and transport of goods -- sellers take care of that. This means most of its adjusted EBITDA gets translated into free cash flow -- more than 90% in the most recent quarter.
Though Etsy's growth has slowed down in the current tough economic environment, the company has kept the enormous gains it made during the first few years of the pandemic in terms of revenue and buyer growth. Gross merchandise sales increased to more than $13 billion last year from about $4.9 billion in 2019. And the number of active buyers reached an all-time high of 91 million in Q2 2023. The company also held onto active buyers at a rate higher than it did during the pre-pandemic era.
Gross merchandise sales showed growth in May, June, and July, a sign that the macroeconomic pressures on Etsy may be lifting. At the same time, it has maintained a solid financial position, with about $1.2 billion in cash on the books at the end of the second quarter.
Meanwhile, Etsy's share price action hasn't been reflecting these positives. The stock has dropped 46% so far this year, leaving it trading at only 13 times forward earnings estimates -- and that's why I'd buy Etsy hand over fist right now.
