Equity markets have had a rough go of it this year due to President Trump's macroeconomic policies. Though it can be challenging to navigate this environment, one way to make the best of it is to look for terrific stocks to invest in while they are down. Doing so could lead to outsized returns for patient, long-term investors.
To that end, let's consider two stocks that have declined by at least 25% this year and look attractive: Viking Therapeutics (VKTX 0.20%) and PayPal (PYPL +3.33%).
NASDAQ: VKTX
Key Data Points
1. Viking Therapeutics
Drugmakers without a single therapy on the market tend to be somewhat risky, but investing in these companies early enough can lead to life-changing returns. Viking Therapeutics, a clinical-stage biotech, looks like one of the more attractive ones right now.
The company focuses on developing medicines for metabolic and endocrine disorders. It rose to fame last year thanks to excellent phase 2 data for its leading candidate, VK2735, a potential weight management therapy.
It's not just that VK2735's results were strong. The market for anti-obesity drugs is growing rapidly and is getting increasingly crowded. Drugmakers big and small are dipping their toes into this space -- very few have delivered mid-stage results that match those of VK2735.
Viking also produced strong phase 2 data for VK2809, a potential treatment for metabolic dysfunction-associated steatohepatitis. Another one of its candidates, VK0214, an investigational treatment for X-linked adrenoleukodystrophy -- a rare genetic nervous system disorder -- completed phase 1 studies recently, too.
While many biotechs at this stage would focus on the candidates already being tested in humans, Viking Therapeutics is still looking for new gems. It is developing a next-gen weight loss medicine that mimics the action of two hormones: amylin and calcitonin. The former aids in controlling blood sugar and satiety, while the latter helps regulate calcium levels. Dual agonists are increasingly popular in this and other fields.
Viking's pre-clinical candidate may not pan out, but the company is constantly searching for the next big thing, an attractive quality in a biotech company. Although the stock has struggled recently, clinical and regulatory progress could lead to substantial gains in the coming years.
The biotech stock might be somewhat risky, but it is well worth initiating a small position in the stock today for those comfortable with some volatility.
NASDAQ: PYPL
Key Data Points
2. PayPal
PayPal's shares fell this year because its fourth-quarter results failed to impress investors. The company's Braintree payment processing platform did not deliver growth on par with what Wall Street expected in its latest period, leading to the sell-off. The market turmoil only added fuel to the fire.
Despite these issues, PayPal is a top fintech stock to buy and hold for a long time. Here are three reasons why.
First, Braintree's disappointing performance in Q4 was due to PayPal's conscious decision to abandon unprofitable volume. That means lower sales (and sales growth), but higher profits and margins for the segment in the future. Short-term pain, long-term gains.
Second, PayPal has made important changes to its business in recent years that should pay off down the road. One of the most attractive opportunities it has conjured up, in my view, is its advertising business.
PayPal is a trusted financial services brand. It ended 2024 with 434 million active accounts -- an increase of 2% year over year -- and millions of businesses that accept it as a payment option. Linking the two parts of the retail transactions it helps facilitate through an ad platform could represent a meaningful revenue source.
Third, PayPal benefits from a strong moat even beyond its brand name. The company's platform displays the network effect. The more businesses within its ecosystem, the more attractive it becomes to consumers, and vice versa. That should allow PayPal to remain a leader in fintech for a long time, and given the industry's long-term prospects, the company could deliver strong results and stock market performances along the way.
That's why the stock is a buy today, while shares are down 26% this year.
