The stock market in 2025 has faced significant pressure due to various factors, including China’s introduction of the DeepSeek R-1 model, trade war concerns, and other macroeconomic uncertainties, leading to substantial sell-offs. The S&P 500 index has decreased by nearly 9% despite some recent recovery, while the growth-oriented Nasdaq Composite index is down about 13.5% over the same period.
Investors should exercise caution given the current uncertainties and risks associated with investing in a volatile market. Nonetheless, the recent sell-offs could provide opportunities to invest in stocks with potential for substantial long-term returns. Two contributors from Motley Fool highlight why certain stocks are promising buys following considerable valuation pullbacks in 2025.
Keith Noonan highlights Reddit (RDDT), whose stock declined in February after reporting fourth-quarter results that showed lower-than-expected user engagement metrics. The stock’s value continued to drop amid trade-war developments and geopolitical tensions, resulting in a 52% decrease from its peak this year. Despite these challenges, Reddit achieved a 71% year-over-year revenue growth, reaching $427.7 million in the fourth quarter, and its daily average unique users (DAUq) increased by 39% to 101.7 million, although this fell short of the Wall Street estimate of 103.1 million. After its valuation decline, Reddit appears to be an overlooked opportunity in the artificial intelligence (AI) sector. The platform has become popular for its extensive repository of user-generated answers to questions, prioritized by a voting system. Reddit is also licensing its data for APIs and AI model training, providing real-time data streams for behavioral analysis and application development. According to International Data Corporation, Reddit sees the AI market (excluding China and Russia) growing at a 20% compound annual growth rate and reaching $1 trillion by 2027. Reddit is utilizing AI to enhance content safety and relevance and plans to promote localized content, aiming to boost international growth and global reach. With the stock still significantly down, Reddit is seen as a valuable investment ahead of its first-quarter results, to be published on May 1.
The analysis continues with insights from Lee Samaha on Hexcel (HXL). Hexcel’s stock is down 30% from its 2025 high, linked to the performance of its major customers, Boeing and Airbus, amid supply chain issues affecting aircraft production. CEO Tom Gentile indicated that 2025 is not meeting initial expectations for commercial aircraft production rate increases due to ongoing supply chain disruptions. Consequently, Hexcel revised its full-year sales, earnings, and free cash flow guidance downward. Specifically, the company reduced its expected deliveries of composites for the Airbus A350 program from 84 shipsets to 68 for 2025. Although the immediate market reaction was negative, Hexcel benefits from Boeing and Airbus’s multiyear backlogs. Additionally, Hexcel is positioned to support higher production rates, potentially leading to significant cash flow growth as airplane production resumes. Hexcel’s strategy of local sourcing in the U.S. and Europe minimizes tariff impacts, estimated to affect $3 million to $4 million per quarter, which can be mitigated through productivity improvements. The revised 2025 guidance for adjusted diluted earnings of $1.85 to $2.05 and free cash flow of $190 million leaves the stock trading at favorable valuation multiples, suggesting solid long-term growth prospects.
