Bear markets are definitely tough times for investors. But they also offer opportunities. Especially when it comes to growth stocks. Some investors have ditched them in favor of companies seen as safer bets during an economic downturn. In many cases, however, the long-term prospects of high-growth companies have not changed. And that means you can pick them up for a bargain today – and potentially win big over time.
Let’s look at three battered growth stocks that could actually crush the market in the coming years. They are each leaders in their fields. And that dominance could help them – and your wallet – win big.
1. Teladoc Health
Teladoc Health (TDOC 3.79%) shares have fallen more than 65% so far this year. This is after the telemedicine company reported non-cash goodwill impairment charges of $2 billion. These were tied to a 2020 Teladoc acquisition that brought it additional expertise in chronic care.
The move was clearly too expensive at the time. But it can be a profitable long-term investment. Nearly half of Americans suffer from at least one chronic disease. And Teladoc said member usage of its chronic care offerings has led to higher member retention rates.
The company’s recent earnings report offered several clues that the worst may be over — and big days may be ahead. Teladoc moved closer to the goal of becoming profitable. The company’s net loss decreased from the prior year period. Teladoc’s revenue and visits soared by double digits. And the company has made gains in terms of the number of members in the United States and revenue per member.
More positive news: the offers are increasingly important. Teladoc said its average deal size in the last quarter was 50% higher than a year earlier.
Teladoc is trading close to its all-time low in terms of sales. Sounds cheap considering Teladoc’s future prospects. Telemedicine is expected to experience double-digit growth over the next few years. And as a leader, Teladoc is well positioned to take advantage of it.
2. Modern
Modern (ARNM 4.76%) decreased by 40% this year. In 2020, investors flocked to the stock to bet on the company’s coronavirus vaccination program. Right now, however, the coronavirus agenda is what is turning some investors away. The concern is about the possibility of lower revenues once the pandemic is over.
Yes, vaccine revenues are likely to decline. But that doesn’t mean Moderna’s good days are over. They may be just getting started. Coronavirus vaccines and boosters could still be windfall revenue in coming years for this market leader, even if revenue is below current levels. At the same time, Moderna is getting closer and closer to bringing additional products to market.
Moderna looks like a much better investment as a multi-product company than as a coronavirus-only vaccine company. This is because he would no longer depend on a single product to generate income.
And here is the best news. Potential products in Phase 3 development could become blockbusters, according to Moderna’s market forecast. They are vaccine candidates against influenza, respiratory syncytial virus and cytomegalovirus.
Moderna has racked up $18 billion in cash – from sales of coronavirus vaccines. It is therefore in great shape to move its candidates from phase 3 of development to commercialization.
Today, Moderna’s stock market declines seem overdone when you consider the company’s long-term revenue potential.
3. Amazon
Rising inflation and supply chain issues weighed Amazon (AMZN -6.80%) over the past year. The e-commerce giant is affected in two ways. First, Amazon pays more for things like shipping its packages. And second, customers have seen their buying power drop – so they might not be spending as much on Amazon.
The current economy is even hurting Amazon’s cloud services business. In the third quarter of this year, Amazon Web Services (AWS) experienced slower growth than in previous quarters. This is when AWS customers limit their spending.
So why will Amazon eventually crush the market? First of all, today’s problems are temporary. And these are external problems. They are not related to Amazon itself.
Second, Amazon has the strength to meet these challenges. For example, AWS’ extended service offerings include less expensive options. This means customers can reduce costs without abandoning AWS. Amazon has also made progress in improving productivity across its entire distribution network.
Finally, it’s important to look at the long-term picture. Amazon is a leader in e-commerce and cloud computing. Both markets are expected to experience double-digit growth over the next few years. Amazon has what it takes to take advantage of it.
Right now, Amazon is trading at the lowest relative to sales in about six years. That’s a bargain considering how much growth Amazon’s two big businesses could deliver over time.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a board member of The Motley Fool. Adria Cimino holds positions at Amazon. The Motley Fool holds posts and recommends Amazon and Teladoc Health. The Motley Fool recommends Moderna. The Motley Fool has a disclosure policy.
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