While the current bull market has served many investors well, it hasn’t necessarily been a rising tide for all boats. Some growth stocks are still showing volatility, which has investors focused on the short term worried. The recent market volatility can be attributed to a number of factors, including concerns about a slowdown in the U.S. economy and a rate hike initiated by the Bank of Japan.
Long-term investors tend to be less concerned about these short-term market movements, but they know that the vagaries of the market over weeks or months alone should not dictate their underlying investment philosophy. Instead, they try to focus on quality companies that they want to own a piece of for the long term, and add to their positions in these companies through market changes, as long as their investment thesis holds.
These investors see stock market declines as investment opportunities for growth-oriented companies that are on sale. And coincidentally, two names are trading at a discount. These long-term investors may want to take a closer look at these companies.
1.Pfizer
Pfizer (NYSE: PFE) shares are trading down about 21% from their 52-week highs, largely due to market disappointment over a sales decline related to slowing sales of Pfizer’s COVID-19 vaccine. The decline was inevitable as pandemic concerns eased and the company’s growth returned to normal levels. But Pfizer remains a strong company, meaning there’s an opportunity for forward-thinking investors.
Pfizer remains one of the world’s top healthcare companies, with a portfolio of medicines that includes leading oncology drugs, vaccines, immunology drugs and more. The company’s $43 billion acquisition of cancer drugmaker Seagen alone — one of a series of acquisitions Pfizer made with cash from its COVID-19 products — is expected to help add eight new blockbuster drugs to the company’s portfolio by 2030.
Pfizer has garnered more drug approvals from the U.S. Food and Drug Administration than any other pharmaceutical company in the past year. While growth has slowed significantly from the height of the pandemic, the company is profitable and revenue is growing again.
In the second quarter of 2024, Pfizer reported revenue of just over $13 billion, up 3% on an operating basis. However, if you strip out the impact of its COVID-19 products, that figure was 14% higher than the same quarter in 2023. Heavyweights in its portfolio, such as its transthyretin amyloidosis cardiomyopathy (ATTR) drug Vyndaqel/Vyndamax/Vynmac and migraine drug Nurtec, both saw their revenue grow by double digits in the quarter, up 71% and 44%, respectively.
While down from the same six-month period in 2023, profit in the first half of 2024 totaled about $3.1 billion. Pfizer has invested heavily in its future growth in recent years through a series of acquisitions and internal business development, but it still had about $7 billion in cash on hand at last count.
Pfizer continues to pay its dividend faithfully. The company’s annual dividend rate is around $1.68 per share, while the stock’s lagging performance has pushed its yield to an astonishing 5.8%.
Pfizer is in a transition period, but the market seems shortsighted to think that this company has exhausted its growth opportunities. The ship will eventually right itself thanks to a solid cash base, market-leading products, and a growing pipeline of blockbusters. All green flags for Pfizer’s future in the coming decade and beyond.
2.PayPal
PayPal (NASDAQ: PYPL) Shares are up about 16% over the past 12 months, but are still down about 77% from their all-time highs. PayPal has had a bumpy few years after the highs it reached during the height of the pandemic. However, the company remains a leader in payment processing technology, still accounting for 45% of all online payments processed globally.
Net revenue increased 8% year over year in the second quarter to $7.9 billion, while operating income rose 17% to $1.3 billion. Total payment volume in the quarter was just under $417 billion, up 11% from the same quarter in 2023. Payment transactions per active account on PayPal are also growing steadily, up 11% year over year, despite the number of active accounts declining slightly.
PayPal reported operating cash flow of $1.5 billion in the quarter, with free cash flow of $1.4 billion. It also had more than $18 billion in cash and investments on its balance sheet at last count, more than enough to cover its $12 billion in debt.
From individual payment processing to commercial use cases, PayPal maintains a strong position in the payments industry that is only being strengthened by the continued growth of the multi-trillion-dollar e-commerce space. While pandemic-level growth may no longer be realistic to expect, PayPal is growing revenue at a healthy pace, increasing its cash flows, and remaining profitable.
This could be a good time to buy the stock, with prices significantly lower than they were during the pandemic.
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Rachel Warren has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends PayPal and Pfizer. The Motley Fool recommends the following options: short September 2024 $62.50 calls on PayPal. The Motley Fool has a disclosure policy.
2 Incredibly Cheap Growth Stocks to Buy Now was originally published by The Motley Fool
