Managing to not lose money on your investments this year will be an accomplishment, as the coronavirus has crippled the value of many stocks early on in 2020. But that doesn't mean every investment has had a bad start to the year.
The three stocks below are soaring, widely outperforming the market, and the best part is that their share prices have room to rise even higher. Here's a look at three of the hottest stocks on the markets right now and why they're not likely to run out of steam any time soon.
1. Zoom
Zoom Video Communications (ZM -0.99%) is up over 80% since the beginning of 2020. The S&P 500, by comparison, is down 14% year to date. The coronavirus has actually lit a match under Zoom because with more people working remotely from home, video conferencing via Zoom is rising in popularity. It's an easy way to communicate and share screens with coworkers, allowing workplaces to stay connected. The company has both free and enterprise options.
Unfortunately, Zoom recently came under fire for security and privacy issues relating to its software. One problem involves uninvited guests gaining access to a meeting, which people are referring to as "Zoombombing."
Image source: Getty Images.
These are concerning issues, but the company is working to address them. Sadly, security issues are the norm for companies across all sectors. And if there's one thing we can take away from Facebook's Cambridge Analytica scandal or many corporate data breaches, it's that investors have short memories. Those crises seem massive when they're first discovered but they haven't crippled companies over the long-term. Even Equifax, which is in the business of protecting sensitive information, was able to survive a massive breach in 2017 that exposed the information of 147 million people.
So, while Zoom's privacy and security issues are front and center today, they likely won't plague the stock a few months from now. Zoom's CEO has been transparent about its failures and said the company is working on resolving the issues. For businesses that are forced to operate remotely, Zoom is still an attractive option to keep costs low while maintaining face-to-face communications. As more workforces begin teleworking, the demand for Zoom's services should only go up. That's why the stock is still a solid buy today.
The company released its fourth-quarter results on March 4, which showed Zoom smashing expectations with revenue of $188.3 million, rising 78% year over year. Both its sales and profit numbers came in above expectations. And there could be more of the same if the coronavirus pandemic continues to keep people working from their homes.
2. Teladoc
Teladoc Health (TDOC -2.91%) is a high-flying stock that provides a platform for virtual doctor's appointments. The healthcare stock up around 75% year to date, and it's also seeing increased demand for its services due to the pandemic. On March 13, the company said it was "experiencing unprecedented daily visit volume in the United States as the novel coronavirus continues to spread globally." Patient visits on Teladoc grew by 50% from the prior week, it said.
Teladoc stated it's able to "bring high-quality, affordable virtual care to every individual who needs care while reducing community exposure." The company provides an important service at a time when hospitals are overburdened and patients are avoiding leaving home.
But what really sent the stock into its current skyward trajectory was a strong performance in the company's fourth quarter. Teladoc released its Q4 results on Feb. 26, which showed revenue increasing by 27% from the prior-year quarter. It had 24% growth in its subscription access fee revenue and 47% growth in its visit fee revenue for consumers without a subscription. Teladoc reported a net loss of $19 million for the quarter, but that was down from Q4 of last year when it recorded a loss of $24.9 million.
Teladoc's numbers are going to get stronger, as the demand for telehealth services isn't likely to drop anytime soon. For exposure to the rise in virtual health, Teladoc is the best option on the market.
3. Moderna
Moderna (MRNA -2.45%) has also been doing very well for its investors, as the stock is up around 63% in 2020. The stock started to take off on Feb. 25, when it jumped more than 16% on news that the company had sent a possible coronavirus vaccine to the National Institute of Allergy and Infectious Diseases for testing. The drug, mRNA-1273, is ready to be tested in phase 1 clinical trials involving humans.
If all goes according to plan, the company may even have the vaccine available as early as this fall, for emergency use. It's an aggressive date given that health officials believe that even 18 months may be too short of a timeframe for a vaccine to be safe for the public.
If Moderna's able to pull it off and have a vaccine that works against the coronavirus ready, whether it's this year or not, the demand will likely be significant. More than 1.6 million people have contracted COVID-19 around the world. There's a pressing need for a vaccine because of the danger that the virus could reemerge and that stopping its current spread may only be a temporary solution.
Moderna's still a fairly small company, generating just $14 million in revenue in its most recent quarter. Its losses have also been north of $120 million in each of the company's past four reporting periods. A successful vaccine for the coronavirus could put Moderna on the map and keep it there. It could be the game-changer that helps make the stock profitable and that enables it to generate even greater returns for investors. The stock's a bit more of a wildcard than the other two listed here, but it may have the most potential upside as well.
Which stock is the best buy today?
All three of these stocks look good today. However, Moderna carries more risk than the other two stocks on this list. If there are negative developments surrounding its potential vaccine or a hint that it may not be as effective as the company hopes it will be, it could cripple the biotech stock. Although there's no reason to believe that will happen, it's a risk that investors should consider nonetheless. Shares of Moderna are also trading at close to 200 times the company's revenue as investors are clearly paying for its future, which assumes its vaccine will be a success.
Image Source: Ycharts
By comparison, Zoom is trading at around 50 times sales, while Teladoc offers the most reasonable multiple of about 20.
With a lower valuation than the other two stocks, Teladoc is the more conservative buy of the three. The healthcare stock has the potential to play a significant role in changing the industry and making healthcare services more easily accessible to everyone which could mean significant long-term growth for the company. While Teladoc's not a cheap buy today, it could be a bargain compared to what it may be trading at in a couple of years from now.
