The Nasdaq Composite Index recently skirted bear market territory, defined as a 20% or more decline from the most recent high. Marketwide worries are partly to blame for this ordeal. For instance, geopolitical tensions have spooked investors, many of whom have chosen to take their money out of the stock market.
Companies that have fallen along with the broader market include streaming leader Netflix (NFLX -0.62%) and biotech giant Moderna (MRNA -0.34%). Despite their recent struggles, though, there is a light at the end of the tunnel for these companies. Here is why both of these stocks are worth buying on the dip.
1. Netflix
Netflix's shares took a dive following the company's fourth-quarter financial results, as it missed its own user growth projections for the period, and its guidance for the first quarter wasn't great either. Many of the company's detractors will point to heightened competition in the streaming industry as one more reason why Netflix will struggle from here on out.
There is no denying that Netflix faces a very different competitive landscape than it did 10 years ago -- and that's something for investors to keep in mind. Still, there arguably remain substantial opportunities ahead for the company. User growth hasn't peaked yet if we are to believe Netflix's long-term plan to replace linear television, which peaked at about 800 million households excluding China.
By comparison, Netflix had "only" 221.8 million paying subscribers as of the end of 2021, representing an 8.9% year-over-year increase. Further, while user growth is important, it isn't everything for the company. What's as critical is giving customers more bang for their bucks, offering enough value so that they will continue coming back to the platform even when Netflix raises its prices.
The company has delivered on this front by offering top-of-the-line content. Last year, six of the company's original shows were in the top 10 most-searched globally. Also, two of the company's movies are among the top 10 most-searched movies in the world in 2021.
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Netflix's award-winning content grants it a degree of pricing power, which is a sign of a strong business model. The company also uses the data it gathers from its customers to craft and release new shows and movies. What does all this mean?
Even as its subscriber growth has slowed recently, Netflix's long-term view remains intact. As it produces quality content to keep its viewers glued to their screens, it will stay near the top of the streaming industry. Clearly, this approach seems to be working, analysts estimate the company will grow 30% next year and 17% annually over the next five years. Given how much the company's shares have fallen in the past year, now is as good a time as any to initiate a position.
2. Moderna
Biotech giant Moderna has had a tough go of it in the past six months. While the company's coronavirus vaccine, Spikevax, has been highly successful, some investors may be are worried about Moderna's post-COVID prospects. And given how much the vaccine maker's market cap had soared -- even exceeding that of seasoned biotechs with rich lineups and pipelines -- it's not too surprising to see the market giving Moderna a little taste of gravity.
Still, the company boasts excellent prospects. First, Moderna still expects to generate solid revenue from Spikevax this year. The company projected sales of about $19 billion for the vaccine in 2022. The biotech's total revenue last year was $18.5 billion. Moderna is in discussions to sign more agreements with various governments worldwide to deliver more doses of Spikevax in 2023.
No one knows what the state of the pandemic will be next year. But Moderna's management believes COVID-19 will become a seasonal disease, which means there will be a constant demand for vaccines. Others have expressed similar opinions, including the CEO of Pfizer Dr. Albert Bourla. In his own words: "Based on what we have seen, we believe that a durable demand from our COVID-19 vaccine, similar to that of the flu vaccines, is a likely outcome."
The White House's chief medical advisor, Dr. Anthony Fauci, has also hinted that he believes COVID-19 could become seasonal. Moderna is working on several other candidates that target various variants of the coronavirus, including omicron. All that is to say, Moderna isn't done benefiting from its coronavirus-related work.
But the company does have other pipeline programs. Moderna recently started a phase 1 clinical trial for a potential HIV vaccine. The biotech is also developing potential vaccines for the flu, the Zika virus, several forms of cancer, and more. Moderna ended 2021 with $17.6 billion in cash and cash equivalents. Expect the company to put that money to good use and advance several pipeline programs in the next few years.
Moderna's COVID-19 portfolio, coupled with its exciting candidates -- some of which will undoubtedly earn regulatory approval in the next half a decade -- spell a promising future for the company.
