Biotech stocks are not for the faint of heart. It is a sector that can provide life-changing gains or cause an investment to head towards zero. Between juggling FDA approvals, new product pipelines and regulatory changes, it takes a lot of due diligence to stay on top of which biotech stocks to buy. Some investors even go so far as to look into the more specific clinical phase trials and even learn about the specific medical technology behind each treatment. 

Over the past few months, biotech stocks have been mounting a comeback. The SPDR S&P Biotech ETF (NYSEARCA:XBI) has gained more than 21% over the past six months and has indicated a potential breakout for the sector. If you’re an investor looking to gain exposure to biotech but are unsure of where to start, add these three red-hot biotech stocks to buy to your May watchlist!

Moderna (MRNA)

Moderna (NASDAQ:MRNA) is among the biotech stocks to buy that made a name for itself during the pandemic. However, the stock has since pulled back by more than 40% since the height of the Covid-19 vaccine race. Despite this pullback, Wall Street has maintained a current one-year price target range of $60 to $310. The street-high target indicates the stock has the potential to nearly double over the next twelve months!

Anytime there is a viral breakout, Moderna is in the mix. The recent appearance of the avian flu in humans has caused Moderna to leap into action as the company has confirmed it is already testing a vaccine. While this may not be just enough to Moderna’s stock a jolt, the company also has multiple exciting drugs coming down its pipeline including mRNA-1345, a vaccine for RSV, cytomegalovirus and even cancer! 

It’s been a tough road for Moderna post-pandemic. Net income has fallen off a cliff and the company has slipped back to being unprofitable. Shares of MRNA are trading at 12.49x sales which is more than double what it was in the first quarter of 2024. However, for those who have faith in Moderna’s loaded pipeline, patient investors may be able to catch its ramp back up into the spotlight.  

Viking Therapeutics (VKTX)

Viking Therapeutics (NASDAQ:VKTX) came out of nowhere this year to post a more than 240% gain in 2024. Wall Street analysts agree with a bullish one-year price target range. The low end of the range is $90 which is a 45% increase from today’s price. At the high end, the target is $138, more than 120% higher. 

So, what has analysts so bullish on Viking Therapeutics? The company has some of the best results for its obesity treatment and could put out legitimate competition for Ozempic. So much so that Viking has been rumored to be the target of a takeover by some of the industry’s biggest names including Pfizer (NYSE:PFE) and Eli Lilly (NYSE:LLY). Either way, whether it is an acquisition or release of a better obesity drug, shareholders have been thrilled so far this year. 

Of course, without a viable product on the market, VKTX is a difficult stock to price. While the company has posted strong preliminary earnings, its hard to judge this stock off of its current revenue or profitability. Instead, it takes proper due diligence and a bit of a leap of faith hoping that its obesity drug trials will pay off for investors. 

Prime Medicine (PRME)

Prime Medicine (NASDAQ:PRME) is a much smaller company than both Moderna and Viking. Although its market cap is just $831 million, there is a lot to be excited about with this gene editing company. This can be seen in the bullishness of Wall Street’s price targets. The average price target of $14.10 is more than double the stock’s current price while the highest target of $20 per share indicates a 200% upside.

This stock has had a roller coaster of a year so far, which isn’t unusual for nano-cap biotech companies. While the company is seeing a slight 20% pullback YTD, shared have seen an optimistic 42% surge back up over the past month. That surge was provided by the FDA approval that gave a green light for PRME’s first trial for its gene editing treatment. Prime will begin testing on patients with the rare genetic disorder known as chronic granulomatous disease. 

Like Viking, Prime has only released preliminary financial results and business updates. However, despite being relatively difficult to value, a successful clinical trial for Prime’s first potential product will no doubt cause a further spike in the stock’s price. While gene editing does have its fair share of risks, buying this company now might very be the the bottom of a revolutionary style of medical treatment. 

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.