3 Top Large-Cap Stocks to Buy in May

First-quarter 2021 earnings season is in full swing, and many companies are surpassing expectations at a record pace. The economy is in rebound mode this year, and cloud-based software is being put to work to unlock new growth opportunities and new efficiencies. Worries the market could be headed for a sell-off are a constant concern, but healthy earnings growth underpins what is shaping up to be another good year for investors.

To that end, three large-cap stocks that look like great buys in May are Apple (AAPL 1.27%), Teladoc Health (TDOC -0.07%), and Zoom Video Communications (ZM 0.05%). Here's why.

1. Apple: The fastest-growing FAANG stock this quarter

Apple is an incredible growth story. Though it's the largest of the FAANG stocks (with a market cap of over $2.2 trillion as of this writing), it also posted the fastest sales expansion among its fellow tech titans to kick off the new year. Revenue and net income surged a respective 54% and 110% higher year over year (YOY) during the first quarter (Apple's fiscal 2021 second quarter).  

Data source: Facebook, Amazon, Netflix, and Alphabet.

It's hard to fathom companies like this as still being in high-growth mode, but that is nonetheless the world we live in. The global economy is being completely reshaped by technology, and Apple iPhones, iPads, Watches, and services delivered through them are in increasingly high demand.

iPhone 12 was a particular standout as the new flagship phones with 5G network chips helped the segment grow 66% year over year. The 5G upgrade cycle is far from over. Apple's top brass expects another double-digit percentage increase in total sales during the next quarter as it laps depressed financial results from the pandemic last year.  

Given Apple's continued revenue expansion, even faster bottom-line growth, and a $90 billion increase to its share repurchase program, shares look like a solid purchase if you somehow still haven't added Apple to your portfolio yet (or want to add to an existing position). Shares trade for 30 times trailing 12-month earnings compared to nearly 40 for the S&P 500 index -- making Apple not only a growth investment but also a compelling bargain right now.  

Image source: Getty Images.

2. Teledoc: Digitizing the healthcare experience

Teladoc Health also had a stellar first quarter, although investors chose to take a more cautious stance on the stock after the report. Share prices are extending their slide from all-time highs in February, and further volatility is likely in the cards this year as the company laps its business boom last year when virtual care took off during the pandemic. But I remain a buyer for the long term. 

Specifically, there was worry over the full-year 2021 U.S. membership count outlook of just 52 million to 53 million -- compared to 51.8 million at the end of 2020. There are headwinds here as many patients may choose to go back to visiting the doctor in person rather than pay the physician a visit via video call. Nevertheless, utilization among Teladoc's members is what really counts, and on that front the company still shines. Total U.S.-based visits increased 69% year over year to 2.72 million in spite of a slow flu season (because social distancing and mask wearing isn't just beating back COVID-19).

It added up to a 151% year-over-year increase in revenue to $454 million in Q1. Revenue grew 69%, excluding the Livongo health monitoring and coaching acquisition last autumn. Adjusted EBITDA was $56.6 million, compared to only $10.7 million in the same period in 2020. And the great start to the year led management to increase its outlook for the full-year period. It now sees total revenue coming in $20 million higher than previously anticipated, to a range of $1.97 billion to $2.02 billion -- up over 80% from 2020.

After the Q1 update, Teladoc's stock price has been nearly halved from its all-time high and looks like a long-term value to me at just 12.6 times expected 2021 revenue. Sooner or later, patience will pay off with this leader in digitally enhanced healthcare.

3. Zoom Video: The future of communications is video

Teladoc isn't the only stock running into headwinds. Zoom will also begin lapping tough comparable figures from last year as the world flocked to its video communications platform during the pandemic. But Zoom's growth story is far from over. Video has sparked a revolution that's here to stay, and the company is still adding tens of thousands of new customers each quarter. It ended fiscal 2021 (the three months ended Jan. 31, 2021) with 467,100 customers with over 10 employees, 33,400 more than the previous quarter alone.

To be sure, Zoom's triple-digit percentage sales growth was never sustainable. But the company's outlook for about 42% year-over-year growth over the next 12 months is absolutely nothing to balk at, considering it's lapping a period when it went from business software niche to household name practically overnight. Businesses have discovered video calls can replace a great number of in-person meetings, thus saving time and money, and more are coming to this realization all the time. I believe Zoom will be the communications business to own for the 2020s.  

Typical of a cloud computing-based software outfit, Zoom itself is also highly profitable. It generated a free cash flow profit margin of 52% in the last year. This rate of profitability will moderate, but it nonetheless underscores the power of the platform. Zoom recently used $100 million of its excess cash to fire up the Zoom Apps Fund to foster an ecosystem of hardware and software tool integrations into its core product. Suffice it to say this is becoming a powerful disruptor of the telecommunications industry and is rewriting the script on how many people work.

Shares have fallen nearly 50% from all-time highs and trade for 20 times one-year forward expected revenue and 68 times trailing 12-month free cash flow. Given how rapidly the company is growing and its ample war chest of cash, this high-growth stock looks like a buy again to me for the long haul.