Stock prices, particularly for growth stocks don’t always reflect the value of a company’s fundamentals. As stocks continue to take a massive hit, investors must be able to discern whether a stock is truly a lost cause or sentiment investors are missing out on long-term fundamental value. Buying stocks of companies with strong foundations and promising financials at a bargain price is a smart investment strategy. I have just the right two in mind to help investors make some good money a few years down the line.
Healthcare company Teladoc Health (NYSE: TDOC) is a leader in the telehealth business now. The coronavirus pandemic boosted its stock from $83 in 2020 to $300 in mid-2021. But investors’ concern over whether demand for telehealth services could sustain as in-person activity resumes and vaccines become widespread has pulled down its stock this year. Despite these worries, Teladoc is a growing company with outstanding long-term prospects.
Another such rising stock is cannabis multi-state operator (MSO) Cresco Labs (OTC: CRLBF), which is aggressively expanding and close to generating $1 billion in revenue this year. Let’s take a look at how these two top stocks can make you rich over time.
Teladoc’s stock has plunged 84% below its 52-week high. But that doesn’t make it a bad investment. Teladoc continues to bring in new customers, driving revenue. Its first-quarter revenue jumped 25% year over year to $565 million, driven by demand both in the U.S. and internationally. Total visits for the quarter surged 35% to 4.5 million.
It reported a huge net loss, but management attributed the loss to a goodwill impairment charge of $6.6 billion. I wouldn’t read too much into this loss as this charge appears to be a one-time thing.
Management revised full-year guidance as higher advertising costs and lower-than-anticipated marketing yields could take a toll on performance. Even with the headwinds, Teladoc is poised to see a revenue jump of 20% this year. It also expects its total visits to be in the range of 18.5 million to 19.5 million this year, versus 15.4 million in 2021.
This healthcare stock is not profitable yet which is not unusual for a growing company but it has a lot of room to evolve. Though Teladoc lowered its guidance for this year, it is mostly related to headwinds in its mental health services which the company believes is temporary. Management discussed in the earnings call that smaller private competitors are adopting aggressive strategies to gain market share but these strategies aren’t sustainable in the longer run.
Virtual telehealth services offer patients a more enjoyable and stress-free medical experience, saving time and money. A survey revealed that 62% of respondents stated patients have higher satisfaction with telehealth services.
Estimates show the global telemedicine market could grow at a compounded growth rate of 18.7% by 2028 — which is why I believe Teladoc’s business will not fade away even as the pandemic landscape changes.
2. Cresco Labs
Cresco Labs has generated $821 million in annual revenue for 2021. Its recent first quarter came as a treat to the investors. Revenue grew 20% to $214 million from the prior-year quarter. Adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) also jumped 45% year over year to $51 million. Cresco has been consistently profitable from an operational standpoint.
The company is expanding aggressively, operating 50 dispensaries nationwide at the moment. With $179 million of cash on hand at the end of the quarter, it is also financially stable to carry on its expansion plans this year.
Cresco made a power move in the quarter when it announced the acquisition of New York-based pot company Columbia Care. If the acquisition goes through, it will add another strong asset to its portfolio. Columbia’s assets will allow Cresco to operate more than 130 dispensaries in 18 states. When the merger starts to show its full potential, Cresco could be a bigger and better cannabis MSO in the U.S.
Wall Street analysts see a monstrous potential upside of 300% for Cresco’s stock in the next 12 months. Sure, the stock is trading close to its 52-week low, so such a huge jump might look far-fetched to some. But it isn’t impossible. Cresco has already done wonders in a limited legal market.
Cannabis is an evolving industry. If state legalization continues to ramp up, Cresco will be profitable in earnings soon. Plus, any positive movement toward cannabis reforms could take the stock sky-high. So why not take advantage of the bargain price now?