It's not just folks overrun with videoconferencing calls who are experiencing Zoom fatigue these days. Investors saw this play out last week when Zoom Video Communications (ZM +1.24%) put out a monster report, only to see its shares fall sharply after the initial euphoric pop.
The quick reversal of Zoom's post-earnings surge prompted Eric Savitz at Barron's over the weekend to wonder if we're nearing the end of the remarkable run of the work-from-home basket of stocks. Shares of companies including Zoom, Peloton (PTON +4.31%), and Teladoc Health (TDOC +0.09%) have been among this year's biggest gainers, up 205%, 62%, and 93%, respectively in 2020. Are the days of market-thumping returns for these stocks now over as growing chunks of the country emerge from the shelter-in-place phase of the pandemic? Don't bet on it. These market darlings should keep winning.
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The great outdoors
Zoom, Peloton, and Teladoc toil away in entirely different industries. Zoom is the now-ubiquitous videoconferencing platform. Peloton offers stationary bikes and treadmills tethered wirelessly to interactive workout sessions. Teladoc is a leader in telehealth, offering medical consultations via the internet without the need to come into a medical office.
It's easy to see why someone would argue that the gravy days are over for the three champs of the pandemic. Offices, front porches, and, to a lesser extent, classrooms are starting to reopen. Your local gym is ready to welcome you back. The doctor is now in. However, it's also naive to think that all of the major gains that these three companies have made will just shift into reverse.
Zoom was using its cloud-based platform to host as many as 10 million people a day back in December. It now hosts 300 million people on peak days, and workers are not going to immediately jump back into the real world. Many leading tech companies have said that working from home will continue to be optional through at least next year. A growing number of school systems aren't ready to return to 100% campus-based curriculums in the fall. Your parents now expect the weekly Zoom check-in calls.
Zoom's blowout quarter, which sent the stock nearly 8% higher on Wednesday before more than giving that back in the subsequent two trading days, was special. The 169% revenue burst was well ahead of the 63% to 65% that it was targeting just three months earlier. Its new guidance calling for $1.775 billion to $1.8 billion on the top line for the entire year is more than double where the outlook stood in March.
Peloton is also pedaling past expectations. It has grown its base of connected-fitness subscribers by 94% to 886,100 over the past year. The 66% revenue gain it posted in its latest quarter was impressive, but the midpoint of its guidance for the current quarter -- calling for a 128% increase -- is even better. With a historical 93% annual retention rate, it's not as if folks making four-figure investments in Peloton hardware are going to be canceling anytime soon. If anything, the end of the stay-at-home phase of this pandemic will allow Peloton to start selling its treadmills again given the in-person delivery process that it hasn't been able to fulfill since March.
As for Teladoc, its business has naturally skyrocketed during the pandemic. Three months ago it was expecting to deliver 5.5 million to 5.9 million visits this year with revenue climbing 26% to 28% higher. Its latest update finds it now forecasting 45% to 49% in top-line growth. It now expects to virtually see between 8 million and 9 million members in 2020, more than double the visits it completed last year.
These platforms aren't going away. Zoom will continue to be a part of the way companies, classrooms, and families communicate. Peloton offers a more convenient, engaging, and ultimately cost-effective alternative to pricey spinning classes. Teladoc is disrupting an industry that was ripe for reinvention. You may long to head back to the office or gym in some capacity, but there's no way you were looking forward to the waiting room of your doctor or therapist.
Zoom, Peloton, and Teladoc were some of the best growth stocks to own through the first five months of the year. They will continue to dominate their respective industries with market-thumping returns for investors.
