The 2025 stock market has been highly volatile, to say the least. While many top stocks have risen above the fray during periods of market recovery, others haven't followed that upward trend. As always, when you're putting cash to work in stocks, it's important to understand your own investing goals, risk tolerance level, and personal investment horizon and incorporate that approach into each business you buy.
If you're looking at a stock to buy on the dip, it's also important to understand the factors that have driven those movements, and whether those downtrodden shares represent a potentially sound investment opportunity or a glaring red flag about the underlying business.
Here are two beaten-down stocks that long-term investors might want to consider buying on the dip and holding for several years at least.
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1. Pfizer
Pfizer (PFE 1.42%) has been underperforming as a stock in the last few years due to a combination of factors, including declining COVID-19 product sales and muted expectations by some investors as key patent expiration dates approach. While the stock is trading at levels last seen a decade ago, and is down about 20% over the last year, things aren't nearly as bleak as they might appear if all you did was look at share prices.
It's true that Pfizer faces several patent expirations in the coming years for key drugs like Eliquis, Ibrance, and Xtandi. Patent expirations mean generic versions can enter the market, eroding sales of the original branded drugs. The good news is that Pfizer's many acquisitions in the last few years, plus its own internal pipeline, have produced an impressive number of newly launched drugs or candidates that can more than offset its patent and COVID-19-related losses as we get into the latter part of the decade and beyond.
Pfizer's acquisition of Seagen was one move that significantly strengthened its oncology portfolio, particularly in antibody-drug conjugates for targets like bladder, breast, and lung cancers. Its medicines like Vyndaqel (for a rare heart condition) and Padcev (for bladder cancer) are exhibiting robust sales increases, while Pfizer is actively pursuing growth in drug target areas, including immunology and rare diseases.
Another key move Pfizer made in the last few years to plan for this shift in sales volume as the pandemic waned and key patent cliffs approached was its purchase of Biohaven Pharmaceuticals. This acquisition significantly strengthened its overall position in the neurology market. Notably, Pfizer acquired Nurtec as part of the purchase of Biohaven. Nurtec was already a top-prescribed medication in its class, approved for both acute treatment and preventive treatment of episodic migraines, and it continues to hold a significant market share.
In 2025, Pfizer anticipates at least four regulatory decisions and up to nine Phase 3 readouts. In terms of Pfizer's financial growth story, while first-quarter revenue declined by 8% compared to the prior-year quarter to $13.72 billion, adjusted diluted earnings per share (EPS) increased by 12% to $0.92 and exceeded Wall Street's expectations. Growth from products like the Vyndaqel family, Padcev, Nurtec, and Lorbrena were key drivers here.
This follows full-year 2024, where revenue totaled $63.6 billion, up 7% from the prior year. Pfizer is undoubtedly in a period of transition, but as one of the world's oldest pharmaceutical companies with an incredibly impressive portfolio and pipeline, it could be a time for smart investors to buy shares on the dip. Pfizer has also maintained a consistent dividend payment record since the 1980s and has increased its dividend each year since 2010. That dividend, which currently yields about 7%, could just be icing on the cake.
2. Target
Target (TGT -0.21%) shares are down about 25% over the past year. Shifting consumer sentiment and some negative public backlash have pressured the business, causing investors to respond in kind. Unlike some competitors with a stronger focus on essentials like groceries, a substantial part of Target's merchandise falls into the discretionary category (electronics, apparel). As consumer confidence wanes and inflation rises, shoppers are prioritizing essential items, affecting sales of discretionary goods across the board, and Target has been no exception.
Looking ahead, Target's management is focused on using durable growth levers to get the business back on track. The retailer aims to achieve more than $15 billion in profitable sales growth by 2030, including by expanding its third-party marketplace Target Plus from approximately $1 billion in 2024 sales to over $5 billion in sales by the beginning of the next decade.
It also plans to double the size of its in-house media company Roundel by 2030. Management says Roundel drove nearly $2 billion in value for the company in 2024. Target's same-day services were its fastest-growing choice for customers shopping in 2024, and the company plans to continue investing in this area.
Target aims to add more than 300 stores over the next 10 years. It intends to open around 20 new stores and invest to remodel many more in the U.S. in 2025. Over 13 million members joined the Target Circle loyalty program in 2024 alone, and Target plans to triple that membership base over the next three years through new perks, benefits, and other enhancements. Right now, people are spending more on essentials and less on discretionary items that typically have higher margins for Target.
Target continues to pivot its focus to historically more durable and accessible spending categories for customers. It launched 45 new beauty brands earlier this year and added 2,000 new items, with 90% priced under $20.
Although a significant portion of Target's sales come from its physical stores, there's a growing contribution from its e-commerce business and omnichannel initiatives like curbside pickup and delivery services. In Q1, comparable sales decreased by 3.8% from one year ago, driven by a 5.7% decline in stores-originated comparable sales. However, digital comparable sales rose 4.7%, partially helped by 35% growth in same-day delivery powered by Target Circle 360.
On another positive note, net earnings totaled more than $1 billion for the three-month period, up 10% year over year. Target has a long history of paying dividends, having paid them faithfully every quarter since it became publicly held in October 1967. The company has also consistently increased its dividend, and 2025 is set to be the 54th consecutive year in which the company has raised its annual dividend.
With the stock offering a dividend yield of about 4.6% and trading at a price-to-earnings (P/E) ratio of just around 11, now could be a time for forward-thinking, income-seeking investors to buy these shares on the dip.
