The stock market has shown impressive gains this year, largely driven by a few dominant tech giants that have capitalized on the artificial intelligence (AI) boom. While these tech stocks have garnered significant attention, other companies, such as Pfizer (NYSE: PFE) and Snap (NYSE: SNAP), have struggled, lagging behind the broader market. Despite their recent challenges, both Pfizer and Snap present intriguing opportunities for long-term investors. Here’s why these stocks could be worth considering, especially while they are currently down.
1. Pfizer (NYSE: PFE)
Challenges and Setbacks
Pfizer, a major player in the pharmaceutical industry, has faced significant hurdles recently. The company saw a sharp decline in revenue and earnings after its COVID-19 vaccine and medicine lost their blockbuster status. Additionally, Pfizer’s pipeline has faced setbacks, including mixed results from a crucial clinical trial for a combination coronavirus/flu vaccine and other challenges in the weight loss segment.
Positive Developments
Despite these obstacles, Pfizer has several positive developments worth noting. In the second quarter, the company reported its first year-over-year revenue growth in a while, reaching $13.3 billion—a 2% increase from the previous year. This growth isn’t solely attributable to its recent $43 billion acquisition of cancer specialist Seagen but reflects broader improvements.
Pfizer has also received numerous new product approvals in 2023, outpacing its peers. Many of these products are still in the early stages of contributing to Pfizer’s revenue. The company is also advancing its once-daily danuglipron in weight loss to pivotal trials, despite dropping the twice-daily version due to adverse reactions.
Long-Term Prospects
Pfizer’s extensive pipeline, especially in oncology following the Seagen acquisition, holds promise for future breakthroughs. The company’s stock, which has risen only 2% this year, offers a forward yield of over 5.88%, significantly higher than the S&P 500’s average. With a history of increasing dividends by 62% over the past decade, Pfizer presents a solid income investment opportunity. Though recovery might take time, Pfizer’s commitment to innovation and its strong dividend yield make it a compelling option for long-term investors.
2. Snap (NYSE: SNAP)
Current Performance and Challenges
Snap has seen a dramatic decline in its stock price this year, falling about 50% and approaching its 52-week and all-time lows. Despite this, the company is making strides in several areas. In the second quarter, Snap’s revenue increased by 16% year-over-year to $1.2 billion. Although this growth is not as robust as it was three years ago, it represents a partial rebound.
Snap remains unprofitable based on generally accepted accounting principles (GAAP), with a net loss per share of $0.15 in the second quarter, an improvement from the $0.24 loss per share a year ago. Nonetheless, Snap’s user base continues to grow, with 432 million daily active users and 850 million monthly active users. The company aims to reach 1 billion MAUs in the near future, which could enhance its value to advertisers.
Strategic Initiatives
Snap has been working on diversifying its revenue streams, including launching a subscription plan called Snapchat+ and investing in generative AI and augmented reality. These initiatives, if successful, could pave the way for Snap to become profitable and deliver substantial returns in the future. The company’s network effect—where the value of its platform increases with more users—further strengthens its long-term prospects.
Investment Considerations
Although Snap is currently trading at under $10 per share and carries some risk, its ongoing efforts to expand its user base and diversify revenue streams make it an intriguing investment opportunity. For those willing to accept the potential volatility, Snap’s low price point could represent a buying opportunity with significant upside potential.
Conclusion
Both Pfizer and Snap have faced considerable challenges recently, but they also offer promising long-term investment opportunities. Pfizer’s solid dividend yield and ongoing innovation in its pipeline make it a strong candidate for income-focused investors. Snap’s growing user base and strategic initiatives suggest potential for future profitability and substantial returns. While these stocks have struggled this year, their long-term prospects could make them worthwhile additions to a diversified investment portfolio.
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