Market Uncertainty Drives Down Major Indexes Amid Tariff Concerns
Over the past several weeks, uncertainty has weighed heavily on stocks, resulting in declines for the three major indexes. Notably, the S&P 500 (SNPINDEX: ^GSPC) even momentarily slipped into bear market territory. Investors are particularly concerned about the potential effects of import tariffs on corporate earnings. Earlier last month, President Donald Trump announced a wide-ranging set of tariffs on various countries. This could lead to higher consumer prices, which may hurt companies’ revenues and raise their costs.
To facilitate negotiations, the president has temporarily halted most tariffs. This is a positive move, suggesting that final duties may be less severe than originally announced. Nevertheless, investors are keen to identify stocks with minimal exposure to this potential headwind, specifically companies that manufacture a significant portion of their products domestically or in countries likely to face lower tariffs.
Vertex Pharmaceuticals: A Tariff Safe Haven
Currently, one notable tariff-safe stock is Vertex Pharmaceuticals (NASDAQ: VRTX). This biotech company, which has climbed nearly 70% over the last three years, presents a valuable buying opportunity. Following a recent dip of about 15%, the underlying reasons for this decrease are not expected to impact the company’s long-term growth.
Strong Financial Performance
Vertex Pharmaceuticals generates billions in annual revenue, primarily from its innovative treatment of cystic fibrosis (CF). The firm is also expanding into additional billion-dollar markets following product approvals over the past year. Vertex’s flagship drug, Trikafta, addresses about 90% of the CF patient population by targeting the defective protein responsible for the disease’s symptoms.
The newly approved medication, Alyftrek, shows promise by addressing further mutations, utilizing a once-daily pill form, and achieving lower sweat chloride levels—an indicator of better protein function compared to Trikafta.
Last year, Vertex’s CF treatments generated over $11 billion, and in its recent quarterly report, the company highlighted Alyftrek’s promising start. Vertex expressed satisfaction with the initial launch dynamics based on physician and patient feedback. This sentiment also applied to its new non-opioid pain management drug, Journavx.
Growth Drivers Ahead
Vertex anticipates transitioning Trikafta patients to Alyftrek while establishing a multibillion-dollar pain management business with the initial approval of Journavx for moderate-to-severe acute pain. The company is also expected to benefit from its forthcoming gene editing therapy, Casgevy, which will launch in the coming quarters.
The recent decline in Vertex’s shares follows issues arising from an illegal CF generic drug dispensed in Russia, negatively impacting international sales. However, Vertex has indicated that this issue is limited to the Russian market and accounted for in its full-year outlook.
Despite this challenge, Vertex has raised its forecast for the low-end of its annual revenue guidance from $11.75 billion to $11.85 billion, while maintaining the high end at $12 billion. The recent launches of Alyftrek and Journavx, along with the expected growth from Casgevy, should significantly boost the company’s revenue in upcoming quarters, highlighting an opportune moment for investors looking to enter Vertex’s stock.
Limited Tariff Impact
Vertex appears relatively insulated from tariff impacts. During the earnings call, the company projected an “immaterial cost impact from tariffs” due to its low exposure to China—the country primarily targeted by Trump’s tariffs—and a diversified supply chain. A key advantage is that Vertex produces most of its CF drugs in the U.S., reducing concerns about tariff-related obstacles.
The recent decline has left Vertex shares trading at 23 times forward earnings estimates, down from over 28 times earlier this year. This valuation appears low, given Vertex’s leading position in the CF market and its prospects for growth in additional treatment areas from its newly approved drugs. Thus, Vertex stands as a solid option in a tariff-focused investment landscape.
Considerations for Investing
Before investing in Vertex Pharmaceuticals, it is important to take note of additional insights:
The Motley Fool Stock Advisor analyst team has recently identified their top 10 stocks for investors, and Vertex Pharmaceuticals did not make the list. The selected stocks have the potential for substantial returns in the forthcoming years.
Consider this: if you had invested $1,000 in Netflix when it made this list on December 17, 2004, it would now be worth approximately $617,181!*
Or if you had invested in Nvidia on April 15, 2005, your initial investment of $1,000 would be around $719,371!*
*Stock Advisor returns as of May 5, 2025
Adria Cimino holds positions in Vertex Pharmaceuticals. The Motley Fool has positions in and recommends Vertex Pharmaceuticals. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
