2 Top Growth Stocks to Watch Ahead of Earnings Season

Earnings season is almost upon us, and amid the ongoing pandemic, struggling economy, and labor shortage crisis, investors are waiting in eager anticipation to see results from their favorite companies. In this Backstage Pass segment, recorded on Oct. 6, Fool contributors Brian Withers, Demitri Kalogeropoulos, and Rachel Warren discuss two well-known stocks that are about to release earnings in the next few weeks and what investors need to know before they do.

Brian Withers: We're coming up on earnings season. We've been chatting in the channel about doing these beat-and-raise and excited we got to do one today and then a couple of weeks there will be this onslaught, there will be like 10 a day that are going to come out near the end of October, so it's going to be super busy when we get there.

But I was going to throw this out to use since we have a few minutes left in the program. Is there a company or trend that you are watching this earnings season? Demitri, why don't you go first?

Demitri Kalogeropoulos: Yes, as if I had another reason to want to watch the Netflix (NFLX 1.74%) earnings report coming up in about two weeks. This new Squid Game thing is just apparently breaking all the streaming records. It's just broken through into American society and global different societies everywhere. All the indications are that this show is just running leaps and bounds ahead of all their previous ones.

Netflix has a huge content catalog, so it's going to be extremely rare for one title to make something move the needle on something like that. I think management is going to definitely tout this. CEO Reed Hastings and his team are going to talk about this release I'm sure because it just happened so close to this earnings and they're going to have some interesting numbers to share. 

Their total, management is projecting that the company is going to add around 3.5 million users in this quarter, which is slower than investors saw obviously last year the company had some phenomenal growth during the pandemic and it's dealing with a little bit of a hangover from that. But they were expecting a really high-growth second half of 2021, and this upcoming report is going to be the first chance to prove that. Because they're releasing a lot more content with Squid Game being one of them.

The fourth quarter the content is even more heavily tilted toward that quarter, so I'm going to be just interested to see what they expect is going to be the big thing over the holidays when people are around family and inside in the cold and watching a lot of TV.

Withers: Yeah, I don't know that Squid Game is going to be on after Thanksgiving dinner, [laughs] the family watchlist.

Rachel Warren: A calming film to pop in. [laughs]

Withers: A dystopian Korean game show, if you fail in the task, you end up dying. Little creepy. But Twilight Zone was a big hit for a lot of times, and I know I watched some of that when I was a kid and just left you unsettled, but it keeps people coming back.

Squid Game may follow the Black Mirror, that's been a huge hit. That's not always a happy go lucky episode either. Rachel, what do you watching for?

Warren: I'm watching for Teladoc's (TDOC -2.91%) earnings report, which should come out I believe either later this month or early next month. I've been seeing some mixed dates on that. But I feel like this is a stock that a lot of investors have [laughs] given up on in recent months because it was this huge pandemic winner.

Then with more people being able to leave their house and go to work and school again, more people are going to the doctor's office, they're finally catching up with those appointments that they had to put off for a long time. I think there's been this consensus among some investors, "Maybe Teladoc isn't so great of a long-term investment."

I personally think Teladoc is a great long-term investment. I think the fact that it is the unequivocal leader in the global telehealth industry, and that's a multi-billion dollar industry that is continuing to see astronomical growth and is on track to realize continued high growth in the coming years. Teladoc leads that industry.

The interesting thing is, although Teladoc's shares have gone on this downward slope in recent months. It's continuing to have really fantastic earnings reports. In the most recent quarter, its revenue grew 109% year over year. It had 28% more visits on its platform than in the second quarter of 2020. That was the early days of the height of the pandemic, so that's incredible that it's reporting those numbers now as things are very much changing into this new sense of normalcy.

It's very much continuing to grow its platform and its revenue, even though right now shares aren't really reflecting that growth. Another interesting thing I would add that I was reading recently, JD Power conducted this 2021 telehealth study of various telehealth providers. 

Teladoc ranked nearly 30 points above the category average and received the highest ranking of all other direct-to-consumer providers, including in areas like customer service, consultation, and enrollment. Happy consumers means more business and return customers. Those are all good things to look for with a company like Teladoc.

I think that right now, shares are down. I think that it's not surprising given all the hype that was surrounding the stock in those earlier days, but the business, the quality of the business, its growth, that's not going anywhere. This is a stock I love, I own shares of, and I'm looking forward to see what the next earnings report has to show.

Withers: I love that study that you mentioned about the customer satisfaction. I think that's so important as consumers are getting more and more options on how they deal with their health.

If Teladoc doesn't make that easy for customers, they aren't going to be successful. I've held Teladoc for a while now and have done the crazy ups and downs. For the last year, it's down 43% over the last 12 months.

Off of its high, it's off 57%. I think there's lots to like about this company and it's going to take a few quarters, but you got me excited about it again, Rachel. [laughs]

Definitely not going to sell. But yeah, it's frustrating to watch some of your favorites just continue to just plug along and never seem to catch a break.