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A mistake that many investors are making today is assuming that things will only get worse, and that now is a time to sell stocks. But just as stocks weren’t destined to continue soaring last year as meme investments were rising to ridiculous valuations, the sky isn’t falling right now either.
Trying to time the market can mean missing out on the rally, and the opportunity to buy stocks at significantly reduced valuations, which can set investors up for incredible profits down the road. A bull run could happen next year if inflation keeps slowing and the economy shows signs of stabilizing. Even if it doesn’t, a rally could take place the following year.
While it’s unclear when a strong bull run may finally arrive, investors shouldn’t doubt that it inevitably will. One thing I’m confident about is that at their reduced valuations, both Meta Platforms (META 2.28%) and Exelixis (EXEL 0.45%) are investments worth loading up on right now. Here’s why.
Meta Platforms, the social media giant that owns Instagram, WhatsApp, and Facebook, has seen its share price take a beating this year, falling 64% while the S&P 500 is down just 19%. The company’s pivot to the metaverse has turned off many investors amid concerns that its losses from that venture will get deeper in the years ahead.
But the metaverse represents just one opportunity for the overall business. CEO Mark Zuckerberg alluded to a potentially more promising one that could bear fruit for the company a lot sooner than the metaverse. According to a report from Reuters, in a company-wide meeting, Zuckerberg said that “we talk a lot about the very long-term opportunities like the metaverse, but the reality is that business messaging is probably going to be the next major pillar of our business as we work to monetize WhatsApp and Messenger more.”
Meta’s different apps have billions of users on them each and every month, so there’s significant potential there for opportunities to drive growth. While it’s concerning that Reality Labs, the segment that includes the metaverse, incurred an operating loss of $3.7 billion for the period ended Sept. 30, the company’s overall operating profit still totaled a positive $5.7 billion and was 20% of total revenue ($27.7 billion).
The company’s business isn’t in trouble by any means. Meta has generated free cash flow of $26.4 billion over the past four quarters, and it has $41.8 billion in cash and short-term investments on its books. Trading at just 11 times earnings, the stock’s low valuation could make investing in Meta an opportunity that’s too good to pass up right now.
Shares of Exelixis are down a relatively modest 13% this year, but the stock is near its 52-week low, and it has the potential to deliver better results in the future.
The biotech company has a solid cancer drug in Cabometyx. The U.S. Food and Drug Administration has approved it for multiple indications, including to treat advanced renal cell carcinoma and thyroid cancer. Exelixis also has another potential treatment, XL092, that is in phase 3 trials to test its effectiveness in fighting metastatic colorectal cancer.
At a market capitalization of just over $5 billion, Exelixis is a promising young business with significant potential, and it could be an attractive acquisition target for a larger healthcare business. With $1.5 billion in cash and short-term investments, Exelixis is well-funded. The company has also generated positive free cash flow in each of its last four quarters, totaling $343.4 million during that stretch.
For the three-month period ended Sept. 30, the company’s revenue totaled $411.7 million, up 25% year over year. Profits of $73.2 million also nearly doubled from the $38.2 million that the company reported in the prior-year period. With such solid numbers and Exelixis trading at just 17 times earnings (the healthcare average is 22), this is an underrated growth stock to buy and hold right now.
Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. David Jagielski has positions in Meta Platforms. The Motley Fool has positions in and recommends Meta Platforms. The Motley Fool recommends Exelixis. The Motley Fool has a disclosure policy.
*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.
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