If you have a high tolerance for volatility then the biotech sector might be for you. Biotech stocks can range from pre-revenue startups to global pharmaceutical giants. All it takes is one treatment to put the company on the map and provide outsized returns for its shareholders.
Biotech is one of those growth sectors that have the potential to provide multibagger returns to your portfolio. Many fortunes have been made with a fortuitous investment in a Biotech stock at the right time. That time might be now, with the Biotech sector heating back up. Over the past six months, the SPDR S&P Biotech ETF (NYSEARCA:XBI) is up more than 26%. Here are three biotech stocks that have the potential to be long-term multibaggers.
Novavax (NVAX)
Novavax (NASDAQ:NVAX) is an American vaccine manufacturer that was founded in 1987. This stock has had seven analyst recommendations in April with two Strong Buys and five Holds. The average price target from analysts is $15.40 with a street-high price target of $38.00. That would represent more than a 1,000% upside from its current price of $3.97.
Oh, how the mighty have fallen. Investors likely remember Novavax as being one of the main companies involved in Operation Warp Speed to find the COVID-19 vaccine in 2020. Since then, the stock has fallen about 98% after Novavax lost the race. Now, Novavax is rebuilding its business and has a September target date for its new coronavirus-influenza seasonal vaccine.
There isn’t much to say about NVAX’s current valuation. Shares trade at just 0.7x sales and with a 5-year revenue CAGR of 96%, Novavax is showing signs of building a strong bottom. From its current price, it isn’t too difficult to see NVAX as a multibagger five or ten years from now.
Halozyme Therapeutics (HALO)
Halozyme Therapeutics (NASDAQ:HALO) is an American biotechnology company that focuses on oncology treatments. The company was founded in 1998 and is based in San Diego, California. The current price of HALO stock is below the lowest analyst price target and well off the average analyst price target of $51.11. At its current price, analysts see an average of 25% upside for 2024.
Not only does Halo deliver oncology treatments for various types of cancer, but it also partners with major pharma companies with its drug-delivery technology. Halozyme is partnered with AbbVie (NYSE:ABBV) for its Enhanze subcutaneous drug delivery method.
The valuation isn’t outrageous for Halozyme and growth is certainly on the uptrend. The stock trades for 12.6x forward earnings and 6.2x sales. Over the past ten years, Halozyme has grown its revenue at a CAGR of 31%. By next year, if this trend continues, Halozyme should hit $1 billion in revenue.
BioMarin Pharmaceutical (BMRN)
BioMarin Pharmaceutical (NASDAQ:BMRN) is an American biotech company that specializes in enzyme replacement therapies. This stock is one of the more widely covered biotech stocks 19 of 24 analysts having a Buy or Strong Buy rating. The average analyst price target is $109.70 with a street-high price target of $140.00 per share.
This biotech company already has eight different treatments on the market and has nearly 20 new treatments developing in its pipeline. BioMarin not only grows its profits but also expands via an aggressive merger strategy. The company has acquired six other biotech firms since 2002.
BioMarin has a market cap of $16 billion and a 10x from there isn’t too farfetched. With a 10-year revenue CAGR of 16%, BMRN’s price should surge. Trading at 7x sales and 33x forward earnings, BioMarin is trading at its lowest multiple in more than a year.
On the date of publication, Ian Hartana and Vayun Chugh did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
