3 Biotech Stocks to Buy on a Dip: July 2024

The biotech sector doesn’t need to be a laughing stock for investors, as the youngsters like to say. Unless the human desire to find solutions to diseases and unfortunate conditions somehow disappears in a dystopian paradigm, the ecosystem is safe. I would venture to say that it is still relevant. However, that doesn’t necessarily mean that you should buy every example of a biotech stock that comes your way.

Certainly, if there was a field where one was forced to take blind risks, the biotech sector would be an ideal candidate. According to Grand View Research, the global biotech market reached a valuation of $1.55 trillion last year. Experts estimate that between 2024 and 2030, the segment could grow at a compound annual growth rate of 13.96%. At its peak, the sector could be worth $3.88 trillion.

The sector does, however, face significant risks: it’s not the most predictable industry. A bad clinical outcome can send a company into the doldrums. Because of this dynamic, it can be worth considering temporarily depressed ideas. With that in mind, here are the biotech stocks to buy on a dip.

Jazz Pharmaceuticals (JAZZ)

Based in Ireland, Jazz Pharmaceuticals (NASDAQ:JAZZ) develops and markets pharmaceutical products that address unmet medical needs. The company specializes in neuroscience, oncology and sleep medicine. Basically, Jazz is one of the biotech stocks to consider for its innovative treatments, especially for narcolepsy and certain types of cancer.

On paper, Jazz needs a win, especially with its second-quarter results coming up. Over the past four quarters, the company has posted an average earnings per share of $4.26. Unfortunately, experts were collectively expecting a $4.68 earnings per share during the period. That translated into a negative earnings surprise of 9.75%. In particular, the first-quarter results weren’t very good.

But if there is one bright spot, it is the valuation. Currently, JAZZ shares are trading at 5.56 times forward earnings and 1.97 times prior-year sales. Between Q1 2023 and Q1 2024, these metrics stood at 6.94 times and 2.3 times, respectively.

Analysts are predicting steady expansion over the next two years. By fiscal 2025, EPS could reach $20.72 on sales of $4.35 billion. Last year, Jazz posted earnings of $18.29 per share on revenue of $3.83 billion. So, it is one of the biotech stocks to keep in mind.

Takeda Pharmaceuticals (TAK)

A global research-based biopharmaceutical company, Takeda Pharmaceuticals (NYSE:TAKE) focuses on various areas including oncology, gastroenterology, neuroscience and rare diseases. It is a prominent company among biotech stocks thanks to its broad portfolio. In addition, the company is known for its strong research and development pipeline.

Currently, TAK stock has not been performing well in the market. Since the beginning of the year, the shares have lost about 5% of their value. Over the last 52 weeks, they have lost about 12% of their value. The five-year return looks bleak, with shareholders suffering a loss of 19%. Frustration is naturally growing against the company.

But if we want to talk about positives, it is again the valuation. At present, the market values ​​TAK stock at a revenue multiple of 1.58X. In the previous year, the multiple was 1.68X. The high point of the aforementioned period was close to 1.8X. Thus, TAK could reach its previous valuation.

Analysts are predicting sales to rise 8.7% to $28.85 billion by the end of the year. Some sources say it’s “millions,” but I’m pretty sure it’s “billions” given the company’s long-standing financial situation. Either way, this is one of the biotech stocks to watch.

Pacira BioSciences (PCRX)

Based in Tampa, Florida, Pacira BioSciences (NASDAQ:PCRX) is a company specializing in non-opioid pain management and regenerative health solutions. Its flagship product is Exparel, which is used for post-surgical pain management. Basically, PCRX ranks among the top biotech stocks to consider because of its specialty in non-opioid solutions.

Like other entities in the sector, Pacira could use a boost. Over the past four quarters, the company has posted an average EPS of 75 cents. However, that figure narrowly missed the collective consensus of 76 cents, resulting in a negative surprise of 1%. Still, the sharp market decline that followed – down nearly 38% year-to-date – presents a speculative idea.

Again, we need to talk about valuation. Currently, PCRX stock is trading at a forward earnings multiple of 7.47X and a sales multiple of 1.57X. In contrast, over the past year, the metrics were 10.03X and 2.47X, respectively.

Analysts expect revenue and earnings to grow through fiscal 2025. By the end of this fiscal year, EPS could reach $3.64 on revenue of $760.61 million. Last year, EPS was $2.81 on revenue of $674.98 million.

As of the date of publication, Josh Enomoto 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 author, subject to the advice of InvestorPlace.com Publication Guidelines.

As of the date of publication, the responsible editor did not hold (either directly or indirectly) any positions in the securities mentioned in this article.