It is frustrating for investors when a stock has to constantly issue shares in order to raise funds so that it can continue to grow. Even though sales may increase, without positive free cash flow, it can become a risky purchase simply because of the potential for dilution, which can lower a company’s stock price.
However, for both AstraZeneca (NASDAQ: AZN) and Nvidia (NASDAQ: NVDA), free cash flow is not a problem. These growing companies have brought in a lot of money to support their operations and could be great buys today.
Healthcare company AstraZeneca generated more than $ 2.2 billion in revenue from its COVID-19 vaccine in the first three quarters of 2021. However, the company also generated double-digit growth in most areas of its business, and even without the vaccine, its top would have totaled $ 23.2 billion, a 21% year-over-year increase.
And that’s with the company pricing its vaccine low enough to be affordable for low-income countries amid the pandemic, treating its vaccine like a non-profit. But in the future, that will change as AstraZeneca sees the pandemic become endemic, with CEO Pascal Soriot saying “we have to learn to live with it”.
For investors, this means that at a higher price, AstraZeneca will likely generate more income from its vaccine this year. Additionally, the company’s cocktail of antibodies, Evusheld, is another catalyst for growth this year. The United States Food and Drug Administration last month granted emergency use authorization for treatment, for certain high-risk people (for example, moderately or severely immunocompromised) who have not yet been exposed to disease.
Although not a substitute for a vaccine, Evusheld can be a useful tool in the fight against the omicron variant. The company says a recent study suggests it remains effective against the new variant of COVID-19. In clinical trials (which took place before the emergence of omicron), Evusheld had an 83% efficacy rate in preventing symptomatic COVID-19.
This year seems to continue to be strong for AstraZeneca given these catalysts. And with a vast pipeline that includes 175 projects across multiple therapeutic areas, the future is also full of growth opportunities.
In the past 12 months, AstraZeneca generated $ 4.3 billion in free cash flow and issued only $ 29 million in shares. That, combined with its strong growth potential, makes it an attractive stock to buy and hold for the long term.
Nvidia is an incredibly fast growing technology company. During its last four quarters, the company the slowest The year-over-year growth rate was 50%, and this was most recently achieved, for the period ending October 31, 2021. However, with $ 7.1 billion in revenue, it s It was still a record quarter for the company. And for one of its key segments, data center sales, the company is experiencing continued growth this year as companies expand their operations.
All of this growth has come against a backdrop of a chip shortage that could extend into 2023, according to a recent warning from Intelligence CEO Pat Gelsinger. Nvidia has spent a lot of money trying to keep up with the excess demand; as of last quarter, the chipmaker had $ 6.9 billion in supply bonds that were still outstanding.
Another thing that will likely require significant resources is the Omniverse, which Nvidia calls “plumbing” for a metaverse. But it could be worth the potential for growth, as Ark Invest founder Cathie Wood believes the metaverse can be a multi-trillion Marlet.
The good news is that Nvidia is well equipped to deal with all of these growth opportunities. Over the past four quarters combined, the company has generated $ 7.2 billion in free cash flow. And as of the last quarter, its cash balance was over $ 19 billion. The long-term potential of the stock makes it one of the most exciting growth investments to hold right now, even despite its high valuation.
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