RNA

2 Potentially High-Reward Growth Stocks to Buy Right Now

Growth stocks have been outpacing value and dividend stocks since 2008, and this performance gap has only widened as the pandemic's impact has waned. Technological breakthroughs are opening new markets in high-demand areas, fueling investor interest in a wide array of next-generation platforms.

Biotechnology, among the best-performing industries until interest rates flipped in 2022, is rife with top growth stocks trading at rock-bottom valuations. For instance, Wall Street analysts think Avidity Biosciences (NASDAQ: RNA) and Larimar Therapeutics (NASDAQ: LRMR) could deliver gains over the next 12 months of 65% and 227%, respectively. Are they right to be so optimistic?

Here is a rundown of each biotech stock's value proposition and risk profile.

Artist's rendering of a hand holding up a glowing growth chart.

Image Source: Getty Images.

Avidity Biosciences: A new approach to RNA therapeutics

Avidity Biosciences stands at the forefront of a groundbreaking approach to RNA therapeutics through its innovative class known as antibody-oligonucleotide conjugates, or AOCs for short. AOCs represent a fusion of the precision offered by RNA therapeutics and the specificity of monoclonal antibodies.

Avidity's lead candidate is Del-desiran (AOC 1001), indicated for myotonic dystrophy type 1, an inherited muscle-wasting disorder that affects approximately 40,000 individuals in the United States. The company expects to launch a pivotal trial for the therapy shortly.

Based on the company's timeline, investors should see the first major clinical update from this planned trial around the middle of 2025. If this trial is successful, it will validate Avidity's novel platform, unlocking enormous latent value for shareholders.

With a cash runway that extends into 2026, the risk of dilution is minimal in the short term. The core risk at this stage is a clinical setback, which, depending on the nature of the setback, could significantly impact shares to the downside. This biotech, in turn, is a high-risk, high-reward vehicle.

Larimar Therapeutics: A potentially deeply undervalued rare disease stock

Larimar Therapeutics is developing a groundbreaking protein replacement therapy named nomlabofusp, targeting Friedreich's ataxia (FA), a rare and debilitating genetic disease. Biogen's acquisition of Reata Pharmaceuticals for $7.3 billion in 2023 highlighted the high stakes and potential of this field, emphasizing the value placed on treatments for such neuromuscular disorders.

This year, Larimar's stock has surged over 55% following the Food and Drug Administration's lift of a partial clinical hold, a promising update from a phase 2 trial, and a successful capital raise that extended its cash runway into 2026.

Despite this progress, Larimar's market capitalization of $459 million may not fully reflect the company's value proposition, considering the $2 billion-plus market opportunity for FA treatments. Although Larimar is not without competition, the unique clinical profile of nomlabofusp could enable the company to capture a substantial market share.

Larimar's path forward is fraught with risk, as clinical trials are inherently unpredictable. A positive outcome for nomlabofusp would likely propel its share price to a multiyear high. At the same time, any major setbacks would almost certainly have a detrimental effect on its share price.

With a limited product pipeline and modest financial reserves, the company's future hinges on the success of its FA therapy, making it a high-risk but potentially high-reward investment.

Should you invest $1,000 in Avidity Biosciences right now?

Before you buy stock in Avidity Biosciences, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Avidity Biosciences wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $697,878!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

See the 10 stocks »

*Stock Advisor returns as of May 28, 2024

George Budwell has no position in any of the stocks mentioned. The Motley Fool recommends Biogen. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Tags

More Related Articles

Info icon

This data feed is not available at this time.

Sign up for the TradeTalks newsletter to receive your weekly dose of trading news, trends and education. Delivered Wednesdays.