The U.S. equity market breathed a sigh of relief on Dec. 16 after the U.S. Federal Reserve disclosed its plans for reduced monthly bond-buying and increased interest rates for 2022. The central bank's aggressive stance on managing the stickier-than-expected inflation can prove to be a major headwind for several growth stocks. Especially those relying excessively on cheap capital. However, fundamentally strong companies with several growth catalysts and robust financial performance could easily withstand those headwinds.
Companies like Marvell Technology (MRVL -4.77%) and Halozyme Therapeutics (HALO 2.19%) can prove to be attractive picks for retail investors, even if they have only $1,000 to invest. Here's why.
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1. Marvell Technology
Shares of data-infrastructure, semiconductor-solutions player Marvell Technology soared by over 17% after it posted stronger-than-expected fiscal 2022 third-quarter results. Revenue soared 61% year over year to $1.2 billion, while adjusted net income jumped 116% year over year to $364 million. Data center and automotive segments have emerged as the key growth areas for Marvell.
The rapid adoption of cloud computing has been driving demand for Marvell's data center-focused, cloud-optimized silicon products, and software offerings. In Q3, revenue from the data center market soared 109% year over year to $499.7 million, making up almost 41% of the company's total revenue. After the acquisition of Inphi (high-speed electro-optics portfolio) and Innovium Technology (networking switches for cloud and edge data centers), Marvell now boasts an end-to-end cloud infrastructure portfolio and is landing several new design wins from its enterprise clients.
Marvell is also targeting the Ethernet Automotive Integrated Circuit (ICs) market worth $1 billion. The modern autonomous vehicle comprises many sensors, central processing units (CPUs), and cameras -- all of which have to be connected with each other. Furthermore, the car has to connect securely with external WiFi and 5G networks, with other cars, and with the cloud. Ethernet networking is used inside the car to fulfill the quality-of-service and bandwidth requirements. In Q3, Marvell raked in $140 million in revenue from this business. With seven out of the top 10 automotive original equipment manufacturers (OEMs) purchasing Marvell chips, the company is set for a solid growth trajectory in this market.
Marvell expects the evolving metaverse to be a big growth driver for its networking and storage business in the coming years. Particularly due to the need for huge data storage in secure environments and high-speed networking for low latency. In view of several growth catalysts, I remain strongly bullish on this stock.
2. Halozyme Therapeutics
Halozyme Therapeutics is undoubtedly one of the safest biotech picks thanks to its robust revenue growth trajectory and solid margins. The company's proprietary drug delivery technology ENHANZE enables change in the process of treatment for several drugs from intravenous to subcutaneous. This technology helps reduce the drug administration time from several hours to only minutes.
Since patients can now receive treatment at home instead of in a hospital setting, the ENHANZE platform is playing a major role in reducing overall healthcare costs and the burden of care on patients and caregivers. Halozyme has entered into licensing agreements for the ENHANZE platform with eleven prominent biopharmaceutical companies. ENHANZE is already being used in five commercialized partner drugs, with potential global sales of $22 billion in 2024.
Royalties (average mid-single-digit percentage of global sales of the partnered drugs) accounted for around 35% of Halozyme's total sales in 2020. With the company expecting Federal Drug Administration (FDA) approvals for more than five additional partnered drugs and more than five products entering phase 3 clinical trials, royalties are expected to account for around 60% of its total revenue. Halozyme has projected its royalty revenue to grow annually at a compound annual growth rate (CAGR) of 40% from $89 million in 2020 to around $1 billion in 2027.
The pharmaceutical industry is rapidly opting for antibody-based drugs over small-molecule oral therapies. Halozyme stands to benefit from new collaboration agreements as well as new drug-development programs. These would be an addition to the company's current projections for royalties. The company also expects co-formulation patents filed by partners to significantly extend the royalty period beyond 2024 in Europe and 2027 in the U.S.
HALO Revenue (TTM) data by YCharts
Unlike many biotech companies, Halozyme boasts strong financials. The company's trailing-12-month revenues are up 132% year over year to $463 million, while net income soared by 1,800% year over year to $409.1 million. With the share of royalties (recurring revenue) as a percentage of the total revenue expected to grow, the company will also witness a solid improvement in overall revenue visibility.
Halozyme also has a very strong balance sheet, with $815.9 million in cash and cash equivalents, and $879.1 million in debt at the end of Q3 (ending Sep. 30, 2021). Holding a solid product offering, improving financials, and a robust balance sheet, the stock is well-positioned to grow rapidly in the coming years.
