A straightforward strategy to invest in stocks that are poised for growth is to buy them when they are breaking out from popularity and sell them when they can no longer deliver good results for shareholders. Buying stocks that are trending gives the investors the confidence that their holdings will be secure, at least for the near term, due to the influx of other buyers who are impressed by a company's results.
From a video game developer to a conglomerate building 5G networks to a coronavirus vaccine manufacturer, all three companies have significant potential to reward investors for the long term. Today, let us take a look at who they are and why you should consider opening a stake in their stock.
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1. Zynga
Up 51% year to date, social video game developer Zynga (ZNGA) has captivated investors with its financial performance. The COVID-19 pandemic has caused many people to stay at home and allocate their entertainment budgets to online games amid lockdowns. As a result, Zynga now has more than 70 million active users who spend approximately $0.248 per day on its games, a massive increase over the $0.188 it had in average revenue per user (ARPU) last year.
For the full 2020 fiscal year, Zynga expects to generate $1.8 billion in revenue, which is about $500 million more than it had in 2019. The company is also growing at a profitable rate, with about $157 million in free cash flow (FCF) in the past 12 months. For those who are interested in growth stocks trading at a reasonable price, Zynga's 5.6 price-to-sales (P/S) valuation makes it a great choice.
2. Corning
Corning (GLW 0.61%) is a diversified life science and industrial company that provides optical communication solutions for 5G carriers. The company is currently working with Qualcomm (QCOM 2.92%) to deliver efficient indoor 5G networks. During the second quarter of 2020, Corning's revenue and adjusted earnings per share (EPS) increased by 7% and 25% compared to first-quarter 2020, to $2.561 billion and $0.25.
In addition, Corning recently received a $204 million grant from the Biomedical Advanced Research and Development Authority (BARDA) to increase the production capacity of its pharmaceutical glass vials used to make COVID-19 vaccines and drugs.
That's not all; Corning is also witnessing increased demand for specialty materials for smartphones, with sales up 13% year over year, and for the automotive particulate filters and TV displays it manufactures.
The good news is that Corning stock is incredibly cheap compared to all its potential. The company trades for just 2.7 times sales and 29 times free cash flow while having a debt-to-equity ratio of only 0.35. For investors who are passionate about 5G stocks and are looking for players with ample diversification, Corning is a top pick.
3. Novavax
In September, Novavax (NVAX 2.32%) was among the first coronavirus vaccine manufacturers to publish peer-review clinical data on its candidate's phase 1 clinical trial in the New England Journal of Medicine. The results demonstrated that NVX-CoV2373, its recombinant (DNA-encoded) coronavirus vaccine, effectively provided immunity against the SARS-CoV-2 virus in a small sample.
Based on the results, the company was able to convince the Government of Canada to purchase 76 million doses of its experimental vaccine contingent on late-stage trials' success. NVX-CoV2373 is currently in a phase 2/3 study.
By mid-2021, Novavax will have the capacity to produce 2 billion doses of its coronavirus vaccine should it do well in clinical testing. That's good news for investors because Novavax only has a $6.8 billion market cap, unlike many other sector players. Even if the company prices its vaccines at a low price of $10 per dose, it will potentially generate $20 billion in annual sales. If biotech investors are looking for a good coronavirus vaccine stock, Novavax is among the cheapest out there.
