Amid sky-high inflation and consecutive rate hikes, the U.S. GDP slumped 0.9% in the second quarter, following a 1.6% contraction in the first quarter. However, many, including President Biden, have refused to tag this as a recession as of now. He said, “If you look at our job market, consumer spending, business investment, we see signs of economic progress in the second quarter, as well.”
On the other hand, July was the best month for Wall Street investors since November 2020, with the S&P 500 gaining 9.1% in the month. The market was buoyed by large companies posting better-than-expected financial results.
Nonetheless, market volatility is palpable and seems to concern the broader markets. The CBOE Volatility Index has gained 32.9% year-to-date.
Given the backdrop, it could be wise to scoop up the quality stock Vertex Pharmaceuticals Incorporated (VRTX), which possesses robust financials. However, fundamentally weak stock NeoGenomics, Inc. (NEO) might be best avoided now.
Stock to Buy:
Vertex Pharmaceuticals Incorporated (VRTX)
Biotechnology company, VRTX, develops and commercializes therapies for treating cystic fibrosis. VRTX also works with investigational small molecules, cell, and genetic therapies, for other serious diseases like sickle cell disease, beta-thalassemia, type 1 diabetes, and others.
On July 11, 2022, VRTX entered into a definitive agreement to acquire ViaCyte, a privately held biotechnology company engaged in delivering novel stem cell-derived cell replacement therapies as a functional cure for type 1 diabetes, for $320 million in cash. This could be a major boost for type 1 diabetes treatment worldwide.
Moreover, VRTX and Verve Therapeutics, Inc. (VERV) announced an exclusive, four-year global research collaboration to develop an in vivo gene editing program for single undisclosed liver disease. VRTX is expected to be responsible for subsequent development, manufacturing, and commercialization of any program stemming from VERV’s research.
For the first quarter ended March 31, 2022, VRTX’s net product revenues increased 21.7% year-over-year to $2.10 billion. Its non-GAAP net income came in at $907 million, up 16.1% year-over-year, while its non-GAAP EPS came in at $3.52, up 18.1% year-over-year. Also, its non-GAAP operating income came in at $1.17 billion, up 16.5% year-over-year.
Analysts expect VRTX’s revenue to be $8.58 billion in 2022, representing a 13.2% year-over-year increase. The company’s EPS is expected to grow 9% year-over-year to $14.19 in 2022. In addition, it has surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 39.9% to close the last trading session at $280.41.
VRTX’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, equating to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
VRTX has an A grade for Quality and a B grade for Growth and Value. It is ranked first among 402 stocks in the Biotech industry. Click here for the additional POWR Ratings for Momentum, Stability, and Sentiment for VRTX.
Stock to Avoid:
NeoGenomics, Inc. (NEO)
NEO operates a network of cancer-focused testing laboratories in the United States, Europe, and Asia. The company provides one of the world's most comprehensive oncology-focused testing menus. It operates through Clinical Services and Pharma Services segments.
NEO’s total net revenue increased marginally year-over-year to $117.17 million for the first quarter ended March 31, 2022. However, its pharma services revenue came in at $18.38 million, down 3.5% year-over-year. Furthermore, its net loss increased 123.4% year-over-year to $49.41 million, while its loss per share increased 110.5% year-over-year to $0.40.
NEO’s EPS is estimated to fall 192.6% year-over-year to a negative $0.79 in 2022. Its EPS is expected to remain negative in 2023. The stock has lost 77.9% over the past year to close the last trading session at $10.12.
NEO’s POWR Ratings reflect its poor prospects. The stock has an overall F rating, equating to a Strong Sell. It has an F grade for Growth and a D for Value and Momentum.
Click here to access the additional POWR Ratings for NEO (Stability, Sentiment, and Quality). Also, NEO is ranked #51 out of 54 stocks in the D-rated Medical - Diagnostics/Research industry.
VRTX shares were trading at $277.39 per share on Monday morning, down $3.02 (-1.08%). Year-to-date, VRTX has gained 26.32%, versus a -12.35% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.
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