2 Incredibly Cheap Growth Stocks to Buy Now

While the current bull market has served many investors well, it hasn’t necessarily been a rising tide for all boats. Some growth stocks continue to experience volatility, and that has left short-term-focused investors unsettled. The recent market volatility is attributed to a number of factors, including concerns about a slowdown in the US economy as well as an interest rate hike instigated 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 should not dictate their basic investment philosophy. Instead, they try to focus on quality businesses that they want to own a piece of for the long term, adding to their positions in these companies through market changes as long as their investment thesis holds.

These investors view market dips as investment opportunities for growth-oriented companies trading on the sell, and it just so happens that two names are trading at a discount that these long-term investors may want to take a closer look at.

1. Pfizer

Pfizer (NYSE: PFE) Shares are trading down about 21% from their 52-week highs, largely due to market disappointment over lower sales of Pfizer’s COVID-19 vaccine sales. The drop was inevitable as concerns over the pandemic eased and the company’s growth returned to normal levels. But Pfizer remains a strong company, which means there’s an opportunity for forward-thinking investors.

Pfizer is still one of the world’s leading healthcare companies, with a portfolio of medicines including oncology drugs, vaccines, immunology drugs and more. The $43 billion acquisition of cancer drug maker Seagen alone — one of a series of acquisitions Pfizer has made fueled by cash from its COVID-19 products — is expected to help add eight new blockbuster drugs in the company’s portfolio by 2030.

Pfizer has racked up more drug approvals from the US Food and Drug Administration than any other pharmaceutical company in the past year. While growth has slowed significantly since 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 operational basis. However, if we strip out the impact of its COVID-19 products, that figure was up 14% from the same quarter in 2023. Heavy hitters in its portfolio, such as amyloid transthyretin (ATTR) cardiomyopathy drug Vyndaqel/Vyndamax/Vynmac and Migraine Drugs Both Nurtecs grew revenue by double-digit percentages in the quarter: 71% and 44%, respectively.

The story continues

Although down from the same six-month period in 2023, profits in the first half of 2024 totaled about $3.1 billion. Pfizer has spent the past few years investing heavily in its future growth through a series of acquisitions and internal business development, but it still had about $7 billion in cash at last count.

Pfizer continues to pay its dividend faithfully. The company’s expected annual dividend rate is about $1.68 per share, while the stock’s trailing performance has driven the yield to a spectacular 5.8%.

Pfizer is in a period of transition, but the market appears to be short-sighted to believe that this company has exhausted its growth opportunity. The ship will eventually right itself thanks to a solid cash base, market-leading products and a burgeoning pipeline of blockbusters. All are green flags for Pfizer’s future in the next decade and beyond.

2. PayPal

PayPal (NASDAQ: PYPL) the stock is up about 16% over the past 12 months, but still remains about 77% off its all-time high. PayPal has had a bumpy few years after the heights it reached during the peak of the pandemic. However, the company remains the market leader in payment processing technologies and still accounts for 45% of all online payments processed globally.

Net income rose 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 reached just $417 billion, up 11% from the same quarter in 2023. Payment transactions per active account on PayPal are also growing steadily, up 11% over the past year , despite the slight decline in active accounts. .

PayPal reported operating cash flow of $1.5 billion this 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, which is only supported by the continued growth of the multi-trillion dollar e-commerce space. While pandemic-level growth may no longer be realistically expected, PayPal is expanding its revenue at a healthy pace, increasing its cash flows and remaining profitable.

Now may be the time to buy the stock as it trades down considerably from pandemic highs.

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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 calls in September 2024 $62.50 on PayPal. The Motley Fool has a disclosure policy.

2 Incredibly Cheap Growth Stocks to Buy Now was originally published by The Motley Fool