Earlier this month the S&P500 reached an all-time high of over 6,000 for the first time ever. Based on that, you might assume that shares might be too expensive to buy right now, as the average shares in the index are trading at more than 25 times earnings. However, there are still many offers.
Two stocks that could be among the best buys right now include: AbVie (NYSE: ABBV) andComcast (NASDAQ: CMCSA).
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Drug manufacturer AbbVie is not having a great year, but it is not having a bad year either. The year-to-date gain was a modest 7% at Monday’s close. That’s decent, but it doesn’t come close to the S&P 500’s more impressive 23% rally.
For a while, the stock outperformed the broad index. However, things recently went sideways for AbbVie after the company reported last week that its schizophrenia drug, emraclidine, failed to meet its primary endpoint in a phase 2 clinical trial. Emraclidine appears to have had the potential to become a blockbuster drug for AbbVie, and investors didn’t take the news lightly and dumped the stock afterward.
For a diverse company like AbbVie, this is in no way a hindrance to its business or long-term prospects. In its most recent quarter, for the period ended September 30, the company reported revenues of $14.5 billion, representing nearly 4% year-over-year sales growth – including a 37% decline at Humira, which recently lost its patent protection. AbbVie’s diverse businesses include immunology, oncology, aesthetics, neuroscience and eye care.
Still, investors generally recognize that the company isn’t a show-off. Abbvie has historically proven itself as a growing company. While the pharmaceutical sector is inherently risky and failures are likely to occur in Abbvie’s pipeline of drug therapies, that in itself isn’t a reason to get bearish on what remains a top stock to buy and hold. Ultimately, the risk-reward profile is too good to ignore.
AbbVie is currently facing a slowdown, but the company expects it will “return to robust growth” by 2025 and grow in the high single digits annually through the end of the decade. And while Humira has lost patent protection, the company has effectively replaced those revenues with Skyrizi and Rinvoq, two immunology drugs that it believes will together deliver higher peak revenues than the popular rheumatoid arthritis treatment.
For investors looking to play the long term, this sell-off could be an opportune time to buy AbbVie on weakness, as it trades at a price-to-earnings ratio (P/E) multiple of 14, which seems dirt cheap for so’ a company. great growth stocks.
Comcast hasn’t had a major sale lately; it’s performing poorly because investors simply haven’t seen a big reason to invest in the company this year. Since January, the stock is down about 2%. The Summer Olympics boosted the company’s revenue in the current quarter, as Comcast reported 7% revenue growth for the period ending September 30 (down from 3% just a quarter earlier), while adjusted earnings per share improved by 3%. But that wasn’t enough to get investors excited about the company. After all, it’s just a short-term boost.
Heading into next year, however, there could be one more growth catalyst to keep an eye out for, and that’s the opening of Universal’s Epic Universe theme park, which is scheduled for May. Comcast’s theme park segment hasn’t fared well this year as attendance fell and revenue for that part of the business fell 5% last quarter.
Business has slowed after record-breaking theme park sales over the past few years, and maintaining that growth is proving to be a challenge. But the launch of a massive 750-acre park should bring some excitement to an already popular tourist area like Orlando. CEO Brian Roberts says the new park will be “the most ambitious and technologically advanced theme park ever.”
Strong numbers from the epic universe next year could make 2025 an epic year for this undervalued stock. And with Comcast recently announcing plans to spin off its cable networks, the company could be a much better investment in the future.
Because these assets represent less than 6% of sales, it won’t drastically reduce the size of the company, but it could add to its long-term potential by allowing it to divert more funds and resources to more attractive growth opportunities (such as theme parks).
Comcast trades at an incredibly low price-to-earnings ratio of 10 and could be an excellent contrarian buy right now.
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David Jagielski has no position in the stocks mentioned. The Motley Fool holds and recommends positions in AbbVie. The Motley Fool recommends Comcast. The Motley Fool has a disclosure policy.
The stock market is rising, but these two stocks are still dirt cheap. Originally published by The Motley Fool
