If you’re looking to buy stocks on the dip, there is certainly no shortage of companies trading down in the current market. Even so, it’s important to distinguish solid companies with a strong path to growth moving forward that have simply been hit in the current market from those that are trading down for legitimate reasons tied to concerns about the underlying business.
On that note, let’s take a look at two beaten-down stocks you may want to consider scooping up right now.
Teladoc Health (TDOC -1.59%) became the star of many investors’ portfolios in the earlier days of the pandemic. However, over the past year, peak sentiment about growth stocks has retreated into the background. Meanwhile, the company has grappled with eye-popping losses attributable to its 2020 Livongo acquisition.
Some investors have changed their tune about the healthcare giant — as evidenced by the stock’s steep 70% decline since the beginning of 2022. As an investor in Teladoc, I feel the pain that many investors have at the stock’s robust downward journey in my portfolio. However, I’m not throwing in the towel. Let me tell you why.
In the age of digital innovation, the convenience and affordability of telehealth options has opened up a new world of quality healthcare options to consumers. Even without insurance, a visit on Teladoc’s platform can run as low as $75 for a general medical visit.
While Teladoc’s recent acquisitions, particularly the purchase of Livongo, have weighed heavily on the company’s bottom line, the outcome is a platform that meets the full spectrum of virtual healthcare needs. Whether you need to speak with a primary care physician, a therapist, a dermatologist, or otherwise, the ease and convenience through which consumers can do so via Teladoc’s platform makes for an incredibly sticky business model.
In the most recent quarter, the company reported a 17% year-over-year revenue increase, a solid clip for a company at this stage in its business growth. And while the company was still unprofitable, it reduced its net loss by a notable 13% from the prior-year period while ending the quarter with a cash position just shy of $900 million.
Management noted in the earnings call that the biggest boost to that growth was BetterHelp, its direct-to-consumer mental health brand, which saw sales rise over 35% as compared to the prior year’s quarter. Another increasingly core segment for Teladoc, thanks to its Livongo acquisition, is its chronic care business. This business noted a 9% increase in the total number of members it enrolled in one or more of those programs in the most recent quarter.
Although there’s room for more than one winner in this space, Teladoc remains the leading presence in the global telehealth industry. While there are likely still bumps in the road ahead for Teladoc investors, its business looks on track for durable growth that investors can benefit from over the long haul.
At its current price, a $2,000 investment in Teladoc would yield about 71 shares.
Shares of shipping and logistics behemoth FedEx (FDX 1.12%) certainly haven’t had an easy time of it this year. With the stock trading down by the mid-double-digits so far in 2022, it’s important for investors important to look beyond these movements at the underlying business to discern where the opportunity lies.
There are several reasons that FedEx has been so hard hit in recent months. First off, with fears of a recession still looming broadly against the backdrop of the current market, consumers are pulling back on spending, particularly discretionary expenditures, and that impacts shipping volumes. If a recession does indeed occur, it’s logical to assume that shipping volumes would decline further.
Ongoing supply chain disruptions have also impacted FedEx’s business. And most recently, the company reported earnings that came below what Wall Street was expecting and were paired with a withdrawal of annual earnings guidance.
Now, given all this, why would you want to consider this stock for your portfolio? For one, the factors impacting FedEx’s stock are tied directly to dynamics across the global market and economy, not correlated to the underlying business itself. It’s also worth mentioning that these are short-term factors. While no one can predict a recession with exact certainty nor identify precisely when one will draw to a close, end they always do.
It’s also important to evaluate FedEx against the backdrop of its industry leadership, balance sheet, and financial track record. From an industry perspective, FedEx controls approximately a 24% share of the global courier and delivery services market and a 43% slice of this market in the Americas. Bear in mind that the global courier and delivery services market hit a valuation of more than $440 billion this year.
While FedEx’s most recent earnings report wasn’t exactly what investors were hoping to hear, it wasn’t all bad news. Far from it. The company reported revenue to the tune of $23.2 billion, a roughly 6% increase on a year-over-year basis. While both its operating income and net income were down slightly from the year-ago period, these figures still came to $1.2 billion and $875 million, respectively, for the three-month reporting window. Now, looking back over the past decade, FedEx has grown its annual revenue, net income, and operating cash flow by respective amounts of 111%, 41%, and 110%.
There’s also one key point for investors to consider when it comes to FedEx, and that’s its dividend. The stock currently yields just shy of 3%, more than the 2% offered by the S&P 500. Over the trailing decade, FedEx’s dividend has risen by a whopping 721%. For income-seeking investors with the patience and fortitude to ride out near-term headwinds, an investment in this tried-and-true stock could reap enviable returns over a period of years.
At its current price, a $2,000 investment in FedEx would leave you with approximately 13 shares.