The stock market has been on fire this year, but much of that performance can be attributed to a handful of tech giants that have a disproportionate weight of the S&P 500 and are benefiting from the artificial intelligence (AI) boom. Many other stocks have been doing well, but it's not that hard to find those moving in the opposite direction.
Pharmaceutical giant Pfizer (NYSE: PFE) and social media platform Snap (NYSE: SNAP) belong to this group: Both have significantly lagged behind broader equities since January. Still, Pfizer and Snap might be good picks for long-term investors, especially while they are down.
1. Pfizer
Pfizer can't catch a break. The drugmaker is still struggling because its revenue and earnings fell off a cliff once its coronavirus medicine and vaccine no longer generated mouthwatering sales. Elsewhere, the company recently reported that one of its promising pipeline candidates, a combination coronavirus/flu vaccine, had mixed results in a pivotal clinical trial. Pfizer has had other pipeline setbacks recently, including in the promising weight loss area.
However, there have been lots of positives for Pfizer as well. In the second quarter, it reported its first year-over-year revenue growth in some time. Pfizer's top line came in at $13.3 billion, 2% higher than the year-ago period. That might not seem like much, but it is a step in the right direction that isn't entirely due to its December acquisition of cancer specialist Seagen for $43 billion.
Further, despite recent clinical setbacks, Pfizer has had plenty of brand-new approvals, including seven in 2023 , more than twice as many as any of its peers. Many of these products are still in the early innings of their contributions to Pfizer's top line. And in the meantime, its reliance on its COVID-19 products will wane. Pfizer will also earn plenty of other brand-new products. It recently advanced once-daily danuglipron in weight loss to pivotal clinical trials.
The company dropped the twice-daily version of this medicine due to severe adverse reactions. Management vowed to keep pursuing breakthroughs in this area. In oncology, Pfizer inherited the very long pipeline that Seagen boasted. Except, Pfizer has far more resources than its new subsidiary ever did, which could help accelerate the development of new blockbusters . Pfizer should succeed in rejuvenating its lineup, and the process is already on the way.
Further, the stock, which is up just 2% for the year, is a decent pick for income investors. Pfizer's forward yield tops 5.88% -- much higher than the S&P 500 's average of 1.33%. Pfizer has increased its payouts by 62% during the past decade. It might take some time before it fully recovers, but the company can still deliver solid returns over the long run, especially for those who opt for automatic dividend reinvestment.
2. Snap
Snap stock has fallen about 50% this year and it isn't too far from its 52-week or all-time low. Investors might think the company's financial results are terrible, its prospects are dim, and there is no hope for a comeback. But that's not the case. Snap has improved on many fronts. During the second quarter, the company's revenue increased by 16% year over year to $1.2 billion. Although Snap's top-line growth isn't as impressive as it was three years ago, it has partly rebounded during the past year.
SNAP Revenue (Quarterly YoY Growth) data by YCharts
True, the company remains unprofitable on the basis of generally accepted accounting principles (GAAP ). Its net loss per share in the second quarter came in at $0.15, better than the $0.24 loss per share reported in the year-ago period. However, Snap's most important asset -- its user base -- is still growing. It ended the period with 432 million daily active users, a 9% year-over-year increase. It had 850 monthly active users (MAUs). It could hit the incredible milestone of 1 billion MAUs within the next couple of years. With this vast ecosystem, businesses will continue seeking Snap's platform to run targeted ads.
Snap has arguably built a network effect , with the more users on its platform, the more valuable it is to other users from the outside looking in and to advertisers. Snap has also been looking to diversify its revenue stream, a plan that is slowly taking shape. The company's initiatives include a subscription plan called Snapchat+ and investments in generative AI and augmented reality. Provided these initiatives pay off, and Snap continues to expand its user base, the company could eventually become profitable and deliver much better returns than it has in recent years.
Snap may be a bit risky, but at less than $10 per share, it is worth considering.
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Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Pfizer. The Motley Fool has a disclosure policy .
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