If you're waiting for the market to sell off in order to start checking names off your shopping list you may want get cracking. A lot of last year's hottest stocks have already corrected sharply and in some cases crashed.
Shares of Zoom Video Communications (ZM -0.94%), Teladoc Health (TDOC 0.49%), and Peloton Interactive (PTON -6.38%) have all plummeted at least 40% since hitting all-time highs. The markdowns seem overdone. Let's take a closer look.
1. Zoom Video
It's hard to find a company that has had a more significant glow-up during the pandemic than Zoom. It wasn't a household name a year ago, and as the pandemic played out became a part of most of our lives.
Despite the Zoom revolution the stock closed on Monday a whopping 47% below October's high-water mark. In other words, the shares would have to nearly double to return to its autumn highs. Investors seem to think that vaccines mean we can uninstall Zoom, but that seems farfetched.
Revenue has risen 355%, 367%, and 369% in Zoom's fiscal second, third, and fourth quarter, respectively. Air travel trends have improved in that time, but corporate meetings and family reunions continue to take place via Zoom. Many schools that were virtual in the fiscal second quarter have moved back to the classroom, but we still see Zoom's explosive growth happening.
Growth will slow at this point, of course. However, Zoom has gone from a market darling fetching a market cap that was north of 100 times its trailing revenue to an entrenched communications juggernaut now going for less than 24 times this new fiscal year's top-line estimate. Given Zoom's knack for conservative outlooks, you have to like its chances here.
It's stunning to see that Teladoc shares have fallen 29% since the company announced plans to acquire Livongo Health this past summer. It's even more unbelievable that Teladoc stock has corrected 43% since last month's all-time high.
Teladoc has emerged as the top dog in telemedicine, offering virtual consultations for a fraction of the cost -- and a fraction of the inconvenience -- of in-office visits. Teladoc's popularity as a platform and as an investment skyrocketed during the pandemic, but the market initially soured on its deal to join forces with Livongo.
If you're not familiar with Livongo, it was actually growing even faster than Teladoc with a next-gen platform that tracks chronic conditions to deliver better outcomes for its users. Livongo's business consists mostly of monitoring folks with diabetes through wireless glucose meters, coaching them back into positive lifestyle moves when blood sugar levels start to spike. Livongo is just scratching the surface with other chronic conditions including hypertension and weight management. More importantly, for skeptics who see Teladoc as mostly a pandemic play -- a flawed stance since e-health, like Zoom, is here to stay -- Livongo offers an all-weather approach to growth.
When Rohit Kulkarni at MKM Partners upgraded Peloton stock on Monday morning it was an argument that the stock's 39% drop since topping out in January was overdone. It didn't help. The connected fitness star took another hit on Monday, closing 41% below its earlier high.
It's hard to bet against Peloton, even when that spinning class you used to frequent before the pandemic keeps emailing you to let you know that it's open for business. Peloton's connected fitness subscribers have soared 134% to 1.67 million accounts. Digital subscriptions it offers to folks who don't have Peloton's treadmills or stationary bikes are growing even faster.
Zoom, Teladoc, and Peloton are monster growth stocks. All three saw revenue more than double in their latest quarters. Deceleration will be in order at this point, but they will keep growing in the near term. Did the bulls get ahead of themselves a couple of weeks and months ago? It's possible, but now selling for 41% to 47% below their recent all-time highs, these are three stocks that will be quick to recover when the market starts to bounce back.