Three Notable Shares Poised for a Potential Santa Claus Surge
Santa Claus is approaching, ready to distribute presents worldwide. But could Santa also provide some benefits for investors? Known as "Santa Claus rallies," these happen towards the end of the year.
Three of our team members think they've identified three stocks that could potentially profit from a Santa Claus rally. Here's why they selected AbbVie (ABBV -1.02%), Novo Nordisk (NVO -1.88%), and Vertex Pharmaceuticals (VRTX -2.30%).
AbbVie – A Worthwhile Long-Term Investment
*David Jagielski (AbbVie)*: As the year winds down, one growth stock that might see a surge is AbbVie. The pharmaceutical company has substantial long-term potential and could be an excellent choice as the year nears its end. The stock has had a lackluster year, with its shares rising only 11% (as of Monday's close), which is less impressive than the S&P 500's 27% increase.
Investors have grown pessimistic about the stock following the company's announcement that its schizophrenia drug, emraclidine, failed to meet its primary endpoint in phase 2 trials, leading to a sell-off in November.
However, this disappointment could present an excellent opportunity to purchase the stock at a reduced price, especially after the company reported some promising news from a different trial. In early December, the company announced positive results for tavapadon, which met both primary and secondary endpoints in a phase 3 trial for treating early Parkinson's. The company plans to submit a new drug application next year, which could lead to another approval related to the disease. In October, regulators granted approval for Vyalev, a treatment for advanced Parkinson's disease.
Not every drug in AbbVie's pipeline will be a success, but this is still a promising growth stock to invest in. With a forward P/E ratio of 15, based on analysts' estimates, it may not be long before AbbVie's stock starts to pick up.
An Exciting Future Awaits for This Pharma Giant
*Prosper Junior Bakiny (Novo Nordisk)*: Numerous factors can cause an end-of-the-year stock market rally, including optimism about the upcoming year. It's challenging to predict which companies will benefit from this rally, but Novo Nordisk is a strong choice for multiple reasons. Let's examine two reasons. First, despite performing well in the first half of the year, the drugmaker has struggled since then. In the last six months, Novo Nordisk's shares have fallen by 24%.
Even though the company reported solid revenue and earnings growth due to its diabetes and obesity medicines, the market might be undervaluing Novo Nordisk. Second, the company could experience significant clinical progress in 2025. Novo Nordisk has several late-stage programs in development. It might report data for CagriSema, an investigational weight loss medicine, which could generate $20 billion by 2030, according to some estimates.
Novo Nordisk could also reveal results for semaglutide, the active ingredient in Wegovy and Ozempic, in treating patients with Alzheimer's disease and metabolic dysfunction-associated steatohepatitis, two areas with high unmet needs. Novo Nordisk's poor performance since June and the potential catalysts it could experience in 2025 might lead to a Santa Claus rally for the stock. However, even if it doesn't, the drugmaker remains one of the stronger picks in the industry. Novo Nordisk is an innovative company that consistently generates strong financial results and has a deep and exciting pipeline.
Santa Claus rally or not, the company is worth investing in for the long term.
An End-of-Year Rebound seems likely
*Keith Speights (Vertex Pharmaceuticals)*: Vertex Pharmaceuticals' shares plummeted on Thursday following the company's announcement of results from a phase 2 clinical trial evaluating suzetrigine in treating painful lumbosacral radiculopathy (LSR), a type of sciatica. However, I believe an end-of-year rebound is likely.
Firstly, the sell-off seems excessive, in my opinion. Investors were concerned that suzetrigine did not perform statistically better than a placebo in the phase 2 trial. Crucially, though, suzetrigine met the study's primary endpoint of reducing pain on the NPRS. Vertex intends to discuss advancing suzetrigine into late-stage testing for LSR with regulators.
It's not unusual for a placebo response to be higher than expected in clinical trials for pain drugs. Vertex's post-hoc analyses suggested that a different trial design could better control this issue in phase 3 testing.
The bigger situation for Vertex involves two anticipated decisions from the U.S. Food and Drug Administration (FDA) within a few weeks. The FDA is slated to declare its approval verdict on the vanzacaftor triplet medication in managing cystic fibrosis by January 2, 2025. They've set a Prescription Drug User Fee Act (PDUFA) date of January 30, 2025, for considering suzetrigine's approval in handling acute pain. (Notably, suzetrigine's late-stage outcomes in this field appeared impressive with no red flags.)
I'm optimistic regarding positive responses from the FDA for both medications. Moreover, I anticipate that the vanzacaftor triplet and suzetrigine will escalate into significant commercial triumphs for Vertex. Santa could very well spark a rally for this biotech stock.
After considering potential benefits for investors, one could argue that AbbVie, despite its recent setbacks, could be a worthwhile long-term investment during a Santa Claus rally. The pharmaceutical company has substantial growth potential and is currently undervalued, with a forward P/E ratio of 15 based on analysts' estimates.
Investors might also see promising opportunities in Novo Nordisk, especially if they believe in the company's potential clinical progress in 2025. The drugmaker could report data for its investigational weight loss medicine, CagriSema, which could generate significant revenue, and also reveal results for semaglutide in treating Alzheimer's disease and metabolic dysfunction-associated steatohepatitis.
