Top Stock Picks: 2 Shares Showing 30% and 27% Decrease, Worth Buying and Holding

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Top Stock Picks: 2 Shares Showing 30% and 27% Decrease, Worth Buying and Holding

No pair of companies has dominated the COVID-19 vaccine market more. Pfizer (NYSE:PFE) And Modern (NASDAQ: MRNA). Both saw their revenues and profits soar, along with their stock prices, as governments rushed to buy millions of doses of their respective vaccines. However, this tailwind came to an abrupt halt as the pandemic subsided, and the market responded accordingly.

Pfizer and Moderna have lagged stocks as a whole for almost two years. Still, there are good reasons to invest in these stocks, at least for long-term investors. Let’s find out more.

1.Pfizer

Investors were disappointed with Pfizer because, beyond its coronavirus-related sales decline, the rest of the company’s product line did not appear capable of generating solid revenue growth. Pfizer shares have fallen 30% over the past year.

However, the drugmaker has made tremendous clinical and regulatory progress over the past year. Pfizer is on a roll, securing major approvals and rejuvenating its drug portfolio, which should help it return to growth once the effects of its COVID-19 products subside.

Last year, Pfizer won regulatory approval for seven new products. They include Litfulo, a treatment for alopecia areata (an autoimmune disease) aimed at patients as young as 12 years old โ€“ the first such treatment in the United States to be approved for patients that young. Pfizer also launched one of the world’s first vaccines against respiratory syncytial virus (RSV), Abrysvo.

Although it will take some time for these products to increase sales, they should ultimately contribute significantly to Pfizer’s growth. The pharmaceutical giant has also strengthened its pipeline, notably with the acquisition of cancer biotechnology specialist Seagen for $43 billion. Pfizer could afford to splurge on buybacks, in part because of the significant windfall from its success in the coronavirus market. Pfizer has 112 programs underway, including 31 in phase 3.

The drugmaker can handle a year or two of declining revenue and do just fine. Long-term investors should therefore not abandon these stocks. Pfizer is also a solid option for income seekers. It currently yields 6.05% and has increased its payouts by almost 17% over the past five years. Pfizer’s cash payout ratio is 193%, suggesting its dividend program is unsustainable. This is likely due to recent acquisitions, but the company has no plans to reduce its payouts.

As management recently stated: โ€œOur goal is to maintain and increase our dividend while reducing our capital structure. ยป Investors need not worry on this front, in my opinion, given Pfizer’s broadening product portfolio and its ability to generate strong earnings and cash flow.

2. Modern

Moderna did not have a large product portfolio to rely on once its coronavirus-related sales fell. And investors have been disenchanted, sending the stock down 27% over the past 12 months.

However, biotechnology is moving in the right direction. First, Moderna has gained some market share in the COVID-19 vaccine space. Although it will never generate the type of sales it once did in this niche, COVID-19 will not go away. Some people, especially those at significant risk of developing severe cases of the disease, continue to get vaccinated.

Notably, Moderna needs this market much more than Pfizer. Recently, the vaccine maker announced positive interim phase 3 results for a next-generation COVID-19 vaccine. Moderna has also taken steps in other areas. The company may join the novel RSV vaccine market this year after sending applications for its candidate to various regulatory bodies in 2023.

The biotech is also conducting several phase 3 studies for other promising candidates. Moderna is testing a combined COVID/flu vaccine in late-stage trials and another against cytomegalovirus. Moderna expects data readings for both later this year. Its late-stage pipeline also includes a potential cancer vaccine. And it is about to begin advanced trials for several other products, including an experimental Epstein-Barr virus vaccine.

The Moderna range is expected to be transformed over the coming years. Investors who hold on to its shares until then (and beyond) should be handsomely rewarded.

Should you invest $1,000 in Pfizer right now?

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Thrive Junior Bakina has no position in any of the stocks mentioned. The Motley Fool holds positions at and recommends Pfizer. The Motley Fool recommends Moderna. The Motley Fool has a disclosure policy.

2 stocks down 30% and 27% to buy and hold was originally published by The Motley Fool

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