Any time is a good time to add to your positions in growth stocks -- even during market downturns. I should say especially during market downturns; that's when you can pick up strong companies at bargain prices.
Here's why it's important to add these sorts of shares to your portfolio: They represent the motor that could drive the value of your portfolio higher over time. That's because they're growing revenue at a faster rate than their peers. And, eventually, more and more investors flock to these sorts of companies.
I mentioned bargain prices above, and those are exactly what bring me to the following three stocks. They're inexpensive now -- and likely to deliver explosive growth over the long term. Let's take a close look at each one.
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Moderna
Moderna (MRNA 1.69%) is generating billions of dollars in coronavirus vaccine revenue. The biotech company reported $18.5 billion in revenue last year. And it expects $19 billion this year, according to advance purchase agreements signed so far. This high level of revenue is resulting in massive amounts of cash; Moderna's cash and equivalents totaled $17.6 billion as of the end of 2021.
This cash level may be one of the most important elements of all, because Moderna has the money needed to advance its pipeline -- and the result should be more products on the market in the coming years. Right now, Moderna has 44 programs in development. It recently launched pivotal phase 3 trials for two potential blockbusters: a cytomegalovirus (CMV) vaccine candidate and a respiratory syncytial virus (RSV) vaccine candidate. If all goes well, Moderna won't be a one-product company for long.
In spite of this, Moderna's shares have been in the doldrums. Since the start of the year, they've dropped about 40%. And right now, the stock is trading at only about 5 times forward earnings estimates; that's down from more than 16 last summer. That looks like a big bargain for a company that's delivering now -- and is set to deliver more growth in the future.
Teladoc
Teladoc Health (TDOC -2.40%) is a leader in online medical visits. It counts many Fortune 500 companies as clients. Teladoc aims to treat the whole person, from mental health to physical health. And that's driven its success through the early days of the pandemic and right into the present. In the fourth quarter of last year, Teladoc reported a 45% increase in revenue; visits climbed 41% to 4.4 million.
Members have been increasing their use of Teladoc over time. We can see that in the chronic-care numbers. For example, the number of chronic-care members enrolled in multiple programs doubled in the fourth quarter compared with the year-earlier period. This is important because Teladoc aims to increase its revenue per member to reach more than $4 billion in revenue by 2024. It looks as if it's on the right path: The average revenue per member in the U.S. climbed 53% in the quarter to $2.49.
Teladoc shares have struggled over the past year. Some investors have worried about competition, or about a significant drop in demand as the pandemic wanes. But the company's recent comments show reasons to be optimistic about the future. So Teladoc, trading at less than 6 times sales, looks considerably undervalued today.
TDOC PS Ratio data by YCharts.
Etsy
Etsy's (ETSY 0.34%) business thrived during the early days of the pandemic, but its growth is far from over. This platform for the selling and buying of handmade goods recently reported a series of records. For the fourth quarter of last year, the company reported record gross merchandise sales (GMS), revenue, and adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization). GMS, a key number for Etsy, climbed more than 16% year over year to $4.2 billion.
But what's particularly encouraging about Etsy is its ability to keep customers coming back. Etsy uses the term "habitual buyers" for those who have spent at least $200 over six days in the trailing 12 months; this group increased 26% year over year. Importantly, this is Etsy's fastest-growing customer group.
Etsy also reached a record for total number of shoppers using the platform -- 90 million. The company has invested in improvements to please buyers, such as making searches more productive and customer support more efficient.
Etsy's shares -- like those of Moderna and Teladoc -- have stumbled in recent weeks, and they've lost about 25% this year. From here, they have the potential to climb 36% within 12 months, according to Wall Street's average forecast. Considering the company's growth and customer loyalty, potential over the long term could be much greater.
