The stock market has clocked many promising days over the last six months as investors seem to be increasingly bullish about the long-term prospects of the global economy. But volatility persists across a range of industries and sectors. When shares of any business are trading down, you need to understand the reason.
A stock on sale is not a reason to hit the buy button, nor should you buy or sell a stock because investors seem to be throwing extra capital into it. But investor sentiment is fickle. Sometimes, even if a business is doing well, investors might turn their back on it for one reason or another.
That can be your opportunity to seize upon a beaten-down stock and become part owner in a compelling business. Here are two such stocks you might consider scooping up as 2024 starts.
1. Pfizer
Pfizer (PFE -0.35%) is trading down by around 37% over the trailing 12 months at the time of this writing. That’s a considerable drop from where the stock was trading a few years ago at the height of its pandemic-era successes fueled by its blockbuster COVID-19 vaccine and antiviral treatment.
In 2022, Pfizer became the first company in the history of the pharmaceutical industry to record revenue of over $100 billion. But in the first nine months of 2023, revenue totaled $44 billion, a notable difference due to the steep decline in sales of its COVID-19 products.
Profits for that nine-month period came to $5.5 billion on the basis of generally accepted accounting principles (GAAP) and $9.9 billion on an adjusted basis. This post-pandemic decline was inevitable at some point. And Pfizer’s revenue total in the first nine months of 2023 was still about 13% higher than what it reported in the same period in 2019, before the pandemic.
Products that fueled Pfizer’s financial performance in the first nine months of 2023 included its Prevnar vaccines (for pneumococcal diseases), Nurtec (a migraine medication the company acquired when it purchased Biohaven Pharmaceuticals), the Vyndaqel family of medicines (for transthyretin amyloid cardiomyopathy), Xeljanz (for multiple ailments including rheumatoid arthritis and ulcerative colitis), and Ibrance (a first-line treatment for HR+/HER2- metastatic breast cancer).
The pandemic era of growth was short-lived, but the company earned billions in profits on the back of these products and immediately got to work planning for the next era of regulatory and business wins.
That era could be getting ever nearer. Pfizer is in the thick of an 18-month period when it plans to launch 19 new products or label expansions, which are estimated to add $20 billion in annual revenue by 2030. The company is also targeting another $25 billion in annual revenue by 2030 due to business deals.
Pfizer continues on a streak of acquisitions, most recently with its purchase of Seagen, which significantly boosted its oncology portfolio. Income investors will be happy to know that Pfizer pays a dividend, and due to its fluctuating stock price in recent months, that yield has risen to nearly 6%.
The dividend has increased by about 17% over the trailing-five-year period. There’s still plenty to like about this stock, and patient investors can benefit from steady income and its long-term growth strategy over the next five to 10 years.
2. Etsy
Etsy (ETSY -2.71%) is trading down by about 47% from where it was one year ago. While some growth stocks have recovered along with the market’s rebound in past months, some businesses — particularly those with heavy exposure to discretionary levels of consumer spending — are still struggling.
This has been a notable factor behind Etsy’s beaten-down stock price. Other issues have played a role as well, including fluctuating profitability, a slowdown in gross merchandise sales (GMS) and revenue, and in new-customer acquisitions.
However, the tide might be turning, slowly but surely. It’s also important to note that from a pre-pandemic comparison, the business is still making substantial progress from a growth perspective. Let’s look at some key facts and figures.
In the third quarter of 2023, Etsy reported revenue of $636 million; GMS of $3 billion; and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $182 million. Those figures represented year-over-year growth rates of 7%, 1.2%, and 9%, respectively.
However, on the basis of a four-year compound annual growth rate, those figures jumped 34% for revenue, 26% for GMS, and 44% for EBITDA. Looking at the most recent quarter, active buyers totaled just shy of 92 million, up 4% from one year ago and 109% from four years ago.
Etsy also reactivated 6 million buyers in the third quarter of 2023, 19% more than it did in the same quarter in 2022. The company has work to do, but the signs of progress are there. And recent workforce reductions — plus the divestiture of Elo7, known as the Etsy of Brazil but a lagging portion of its business — should make a difference in future quarters.
Profitability is improving, too, with $224 million in profits on the basis of generally accepted accounting principles (GAAP) in the first nine months of 2023. Investors might find that even a small position in this stock pays off over the next several years.
