2022 has been a terrible year for growth stocks in general. Indeed, the Nasdaq has sunk around 20% year to date, and around 10% over the past year. This has been due to inflationary worries and rising interest rates.

One of the worst performing growth stocks has been Teladoc (NYSE: TDOC), which has now dropped over 80% in the past year. This means that the company is now priced the same as it was following its initial public offering in 2015, despite growing revenues by around 3,000% over the same period. Therefore, I feel that the sell-off in Teladoc has now been overdone, and I’d buy more for my portfolio. 

Recent trading update 

The company’s recent trading update was abysmal and, on Thursday, the Teladoc share price fell over 40%. But what was so bad about it? 

Firstly, the company recorded a non-cash goodwill impairment charge of $6.6bn. This was due to Teladoc’s acquisition of Livongo in late 2020, for which it paid $18.5bn. However, it is now accepted that Teladoc severely overpaid for this acquisition, hence the extremely large impairment charge. 

Secondly, revenue guidance for 2022 was lowered from $2.6bn to $2.45bn. It also forecasted Q2 sales of around $590m, which was lower than expected. These reflect the difficult macroeconomic environment, including high interest rates. 

However, I still believe that the 44% drop on Thursday was an overreaction. While the goodwill impairment is bad news, it does not affect Teladoc’s cash position. Therefore, from a financial standpoint, Teladoc has not actually lost this $6.6bn — it’s purely an accounting measure. Also, the updated revenue guidance still forecasts revenue growth of around 20% year on year. For a company that current trades at a price-to-sales ratio of just over two, this is strong growth. These are some reasons I feel that this growth stock can now recover. 

Other reasons to buy this growth stock 

Initially, I bought Teladoc when it fell below $100. While I now recognise that I bought in way too early, the reasons I bought remain intact. For example, there are signs that the telehealth industry is growing, and McKinsey and Company projects that the virtual healthcare market will be able to reach $250bn. This would hugely benefit Teladoc. 

Further, the fact that revenues are still growing after the pandemic shows that Teladoc was not only a ‘Covid stock’. This offers some hope for the future and demonstrates that the sell-off may now be overdone. 

Finally, after falling over 80% in the past 12 months, Teladoc is now a potential takeover target from other growth stocks, including Amazon or Microsoft. Both these companies are involved in the telehealth sector, and as Teladoc is a market leader, it might be a shrewd acquisition at the current price. Any news of a potential takeover could see the Teladoc share price soar.  

Therefore, although it remains a risk, and the sentiment is currently at an all-time low, Teladoc is a stock I’ll continue to buy at these levels. This is because I feel the potential reward far outweighs the downsides. 

The post Down over 80%, I think this growth stock is a screaming buy! appeared first on The Twelfth Magpie.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Stuart Blair owns shares of Teladoc Health. The Motley Fool UK has recommended Amazon, Microsoft, and Teladoc Health. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Valuation perspective

Due to the extra demand that Covid brought, the Teladoc share price soared in 2020, and reached a peak of $295 in February 2021. But the past year, has not been pretty for the company, and the stock is now priced at just $80. This is around a 70% decline in a year. Further, Teladoc is now priced below its pre-Covid levels.

But this valuation seems entirely detached from the performance of the company. In fact, for full-year 2021, Teladoc expects revenues of over $2bn, over a 90% year-on-year rise. This gives the firm a price-to-sales ratio of under 7. Compare it to Zoom, another beaten-down growth stock, which has a price-to-sales ratio of over 12. Zoom is also seeing slower revenue growth than Teladoc, with a 35% year-on-year rise in the third quarter. Therefore, in comparison, Teladoc looks far too cheap from a revenue perspective. As such, a recovery in the Teladoc share price seems warranted. 

It does have to be mentioned that Teladoc is still loss-making though, and it’s not expected to make any profits for the foreseeable future. Significant losses have been caused by the acquisition of Livongo, which in hindsight, may have been overpriced. Indeed, at the time of the acquisition, Livongo was valued at around $18.5bn, while Teladoc is now only valued at around $13bn. But while this unprofitability increases the risk of the shares, I’m willing to overlook it due to the company’s growth in other areas.

Other reasons this growth stock could rise

Teladoc operates in the telehealth industry and has established itself as a global leader in this market. There are also signs that this industry is growing. In fact, McKinsey & Company projected that the virtual healthcare market will reach $250bn. This would certainly benefit Teladoc.

Fears that the company will see reduced demand post-Covid have also not come to pass so far. In fact, in the third quarter of this year, Teladoc still saw year-on-year revenue growth of 81%. This is despite coronavirus being an even more prominent concern in 2020. Such incredible growth demonstrates that the share price fall is not correlated to Teladoc’s performance. Instead, it seems solely due to the general sell-off of growth stocks. I believe that this sell-off has now been overdone. Teladoc, in particular, seems oversold.

Therefore, due to the excellent growth at the firm, and the fact that its price hasn’t been this low since 2019, I will continue to buy more Teladoc shares.

The post A beaten-down growth stock I think can recover in 2022 appeared first on The Twelfth Magpie.

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• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?

Stuart Blair owns shares of Teladoc Health. The Motley Fool UK has recommended Teladoc Health and Zoom Video Communications. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

This stock could zoom upwards

After soaring in 2020 due to the pandemic, Zoom (NASDAQ: ZM) has fallen back significantly this year. In fact, over the past year, the stock is down 54%. This is mainly due to fears that the excellent growth was solely due to the pandemic, and it will slow significantly in a post-Covid world, with face-to-face meetings the norm once again. But with the fears of the new variant, this Covid stock may be an excellent pick once again.

Despite this, many people believe that stock is just a coronavirus play, and long-term growth prospects are shaky. But while this is a risk, I believe Zoom is more than just a Covid stock, and the new variant simply gives it a further boost. In fact, for the FY2022, the company expects revenues of over $4bn, over a 50% rise year-on-year. This is despite the fact that face-to-face meetings have become far more common once again. Therefore, this is a stock I’m tempted to add to my portfolio.

A telehealth provider

I’ve written about my optimism for Teladoc multiple times, and the recent variant news has reinforced this. In my opinion, the stock is oversold, and is now 62% off its recent high. Over the past year, it has also fallen 45%. Like Zoom, this has been due to fears of slowing growth after Covid.

But with the new variant, this offers an ideal opportunity for the company to gain new customers for the long term. I believe this should prompt the stock to recover some of its recent losses, and therefore I may buy more.

A UK Covid stock

ASOS (LSE: ASC) is another stock that has struggled in recent months, especially as revenue growth for the next financial year is only expected to be around 10-15%. Issues of labour cost inflation and other increased costs have also had a negative effect. This has led to fears around the company’s profit margins, which are currently at only 5.3%.

But I think that the new variant could lead to increased demand, especially if many shoppers decide to go back to online shopping. This should help boost profits, which will also allow heavier investments in parts of the business, such as in the US.

Even without any potential boost from this new variant, the ASOS share price still looks too cheap. In fact, it has a price-to-earnings ratio of around 20, and a price-to-sales ratio of under 1. For a growth stock, this is incredibly cheap. As such, although there are several risks to consider, this is a Covid stock that I’m very tempted to add to my portfolio.

The post 3 Covid stocks to buy now appeared first on The Twelfth Magpie.

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Stuart Blair owns shares in Teladoc Health. The Motley Fool UK has recommended ASOS, Teladoc Health, and Zoom Video Communications. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

A telehealth provider

Teladoc (NYSE: TDOC) has suffered a tragic decline since February this year, with the shares falling over 60%. Over the past year, it has also seen a decline of around 45%. This is despite the company continuing to grow revenues, even despite fears that telehealth will become less relevant after Covid. 

In fact, in the company’s Q3 trading update, it reported revenue growth of 81% year-on-year, hitting $522m. This means that the company expects full-year revenues of over $2bn, around twice as much as last year. The company also recently launched Primary360, which allows clients to pick their healthcare provider. I feel that this will help the company cement its position as a market leader in the telehealth sector. The consultancy firm McKinsey & Company also estimates that the US virtual care market could reach $250bn. With a market cap of just $17bn, and as a current leader in this market, Teladoc has plenty more room to grow.

But there are risks for the growth stock, which is the main reason why the shares have fallen. For example, the transition to virtual healthcare is certainly not guaranteed, and many customers may revert to face-to-face healthcare post-Covid. Further, the company is continually posting losses, and in Q3, the net loss totalled $84.3m. Although this was primarily due to stock-based compensation, which should cease at some point, it is still a slight worry that the company is unable to reach profitability despite the surge of demand caused by Covid. Even so, I think the company’s potential outweighs these risks, and I may add more shares to my portfolio.

A Chinese growth stock

Alibaba (NYSE: BABA) has struggled over the past year, falling 50%. This has mainly due to regulatory crackdowns from the Chinese government, which have threatened to depress profits for the e-commerce company. This worsened recently, as Alibaba was fined once again on Saturday for anti-competitive behaviour.

The most recent Q2 results were also disappointing, and this has seen the Alibaba share price fall to post-pandemic lows. In fact, although revenue managed to grow 29% year-on-year to over $31bn, this was below analysts’ estimations and far slower growth than last year. Net income also only managed to reach $524m, an 87% decrease from last year. Although this was mainly due to changes in the market price of the company’s equity investments, alongside increased investment from the company, it is still a worry.

But with Alibaba shares priced at just $136, I feel that it is oversold. Indeed, despite the headwinds it faces, it still expects FY2022 revenue growth of over 20%. This is far slower than last year, but still a positive sign that it is managing to grow. Slower growth is also factored into the share price. Indeed, it has a forward price-to-sales ratio of around three. This is very low for a growth stock, and despite the company’s slowing growth, still demonstrates undervaluation. Therefore, I may buy some Alibaba shares.

The post 2 oversold growth stocks to buy today appeared first on The Twelfth Magpie.

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• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?

Stuart Blair owns shares in Teladoc Health. The Motley Fool UK has recommended Teladoc Health. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Telehealth provider

Teladoc (NYSE: TDOC) saw its share price soar during the pandemic as many people in the US opted for virtual healthcare. Nonetheless, its performance has been far weaker in recent months, and year-to-date, it’s fallen over 20%. This is because investors have started to worry about the company’s post-Covid prospects. But in my view, its current share price of around $150 doesn’t reflect its huge potential.

Indeed, even after Covid, the company is seeing incredible growth. For example, in the most recent Q3 trading update, revenues reached $522m, which was an 81% rise year-on-year. This means that full-year revenues are expected to reach over $2bn. This gives the company a price-to-sales ratio of around 10. While this does not indicate a really cheap valuation, it is undervalued in comparison to many other growth stocks. For instance, Shopify trades on a price-to-sales ratio of around 37, even though its revenue growth is slower than Teladoc’s. Accordingly, if Teladoc keeps growing revenues at the current rate, I feel its share price will be able to rise as well to reflect this.

However, there are risks. For example, in the third quarter it saw a net loss of nearly $85m. While many growth stocks are unprofitable, it is still a risk worth considering. It is also a factor that could prevent the stock from surging in price. If revenue growth slows, the price could also fall heavily.

But I am confident in the future and therefore, Teladoc makes up part of my portfolio. After the company signed recent agreements with CVS Health and Centene, I can also see the revenue growth staying at the same rate. This means that the prospect of the stock soaring seems feasible to me.

A Latin American growth stock

MercadoLibre (NASDAQ: MELI) is the other growth stock I feel could soar in the coming years, especially after its recent dip. This dip has partly been due to worries of supply chain disruption in the e-commerce market, a factor which may strain profits. Nonetheless, while this is certainly a risk, the prospects of this Latin American e-commerce stock look too good to ignore.

In fact, in the company’s Q2 trading update, it recorded revenues of $1.7bn, a year-on-year increase of 102.6%. It also managed to make a small profit of $68.2m, even though the company is prioritising growth over profits. These excellent results were boosted by the company’s fintech segment, Mercado Pago, which now has around 100m unique active users. This offers a new dimension to the company, something I feel will contribute towards larger revenues and profits in the future.

As a market leader in e-commerce in Latin America, which is still fairly unpenetrated, I also feel that the company’s growth prospects are far better than many of its competitors, including Shopify and Amazon. Therefore, if the company continues with its 100% revenue growth, I believe the share price will rise significantly as well. As such, I am tempted to buy more shares. 

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Stuart Blair owns shares in MercadoLibre and Teladoc Health. The Motley Fool UK owns shares of and has recommended Amazon, MercadoLibre, Shopify, and Teladoc Health. The Motley Fool UK has recommended the following options: long January 2022 $1,920 calls on Amazon, long January 2023 $1,140 calls on Shopify, short January 2022 $1,940 calls on Amazon, and short January 2023 $1,160 calls on Shopify. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Virtual healthcare stock

The Teladoc (NYSE: TDOC) share price soared last year as virtual healthcare drastically grew in popularity due to the pandemic. Indeed, at the start of February 2021, it had reached nearly $300, 262% higher than it was at the start of 2020. But fears that demand for virtual healthcare will decline after the pandemic have caused the share price to fall 50% to under $150.

But I feel that demand will remain strong. In fact, in the recent second-quarter trading update, revenues had grown 109% year-on-year to over $500m. Full-year 2021 revenue guidance was also raised to over $2bn, from a previous estimate of $1.97bn. This demonstrates that customer numbers continue to grow, despite the pandemic starting to come to an end. Such rising revenue is essential for any growth stock, and this is why Teladoc makes up part of my portfolio.

But there are risks. Slightly worrying was the $134m loss that the company recorded. Yet I’m not too concerned about this. In fact, a large portion of the loss came from the $83m spent on stock-based compensation, due to the acquisition of Livongo last year. I believe this acquisition gives Teladoc a competitive edge over its competitors, which should help fuel growth in the future.

A fashion-focused UK growth stock

ASOS (LSE: ASC) was another company that benefited from the pandemic, due to shoppers being forced to go online. This meant that active customer numbers have now reached over 26m, up from around 20m this time last year. However, the recent trading update also revealed that things were now becoming more difficult for the online retailer. Indeed, due to “volatility in demand”, sales had become more muted in the final weeks of June. Profits were also being squeezed due to global supply chain pressures. This caused the ASOS share price to fall 14% in one day, and it is currently still below 4,000p, having reached nearly 6,000p in March this year.

But I feel that this dip offers a good time to buy this UK growth stock. Indeed, the ending of lockdown means that more young people will be going out again. This often correlates with an increase in spending on clothes. Accordingly, the opportunities look promising for ASOS, and the recent acquisition of Topshop and Miss Selfridge should also help to propel this growth. The company also recently raised £500m through a convertible bond, demonstrating that it has confidence in its growth abilities. This is why I believe ASOS could be an excellent addition to my portfolio.

The post 2 beaten-down growth stocks to buy now appeared first on The Twelfth Magpie.

More reading

• How much is needed in an ISA to unlock £1,220 of passive income a year?
• Forget meal deals! Here’s how £8 a day could be worth £357,000
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• The CMC Markets share price is smashing the FTSE 100 in 2026. Is there an opportunity here?
• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?

Stuart Blair owns shares in Teladoc Health. The Motley Fool UK owns shares of and has recommended Teladoc Health. The Motley Fool UK has recommended ASOS. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.