We might have to rename growth stocks to groan stocks. It seems to be a recurring pattern for former high-flying stocks to flounder.
Sometimes, quarterly updates bring good news for beleaguered stocks. That hasn't been true in recent days, though. These three growth stocks were especially pummeled last week after disappointing earnings announcements. But are they buys now?
1. Teladoc Health
Teladoc Health (TDOC 2.73%) stock cratered nearly 50% on Thursday after the virtual care provider reported its first-quarter results. Investors' jaws dropped on Teladoc's net loss of $6.67 billion. The company's lower 2022 outlook added insult to injury.
In 2020, Teladoc ranked as one of the hottest stocks on the market. The COVID-19 pandemic fueled a boom in the use of telehealth services. However, Teladoc's sizzle began to fizzle in 2021. Now, many investors have thrown in the towel altogether on the stock.
But there are definitely several arguments for buying Teladoc right now. For one thing, its shares trade at around 2.4 times forward sales after its huge decline. That could be an enticing valuation considering the tremendous potential market for virtual care services.
Teladoc's business also isn't in nearly as bad a shape as you might think. Most of the huge loss in Q1 stemmed from a goodwill impairment related to the Livongo acquisition. Without that writedown, Teladoc's bottom line improved dramatically year over year and even beat Wall Street expectations.
Even with the lower 2022 guidance, Teladoc still projects revenue growth in the ballpark of 20%. The company thinks that the issues weighing on growth this year should only be temporary.
It's easy to be discouraged when a stock performs as dismally as Teladoc has. However, this beaten-down healthcare stock looks more attractive than it's been in a long time for patient long-term investors.
2. Align Technology
Shares of Align Technology (ALGN 1.62%) tanked close to 20% on Thursday. The dental technology company missed analysts' top- and bottom-line estimates when it reported first-quarter results following the market close on Wednesday.
Align's woes were caused by multiple headwinds. COVID-19 hurt the company's business in China, with the world's most heavily populated country experiencing another coronavirus surge. The decline in consumer confidence in the wake of soaring inflation negatively affected sales in the U.S. and elsewhere. Russia's invasion of Ukraine especially affected consumers in Europe.
These are dark clouds, to be sure. However, there are a couple of silver linings for Align. First, the issues are temporary. COVID-19 cases will almost certainly decline over time. Consumer confidence will rebound sooner or later. Second, Align's long-term prospects remain strong.
Align CEO Joe Hogan noted that his company still has less than 10% of the global orthodontic market. He also maintained that "no other company is as well-positioned to take advantage of that potential as the environment improves and growth trends return."
Hogan is right, in my view. Align appears to be a smart pick to buy on the pullback.
Amazon.com (AMZN 1.21%) delivered the most sluggish growth in years with its Q1 update. Shares of the internet giant sank 14% on Friday after Amazon reported its latest results following the market close on Thursday.
Online retail sales are no longer rising as they did during the worst of the pandemic. Amazon built up capacity in its fulfillment and transportation network in 2020 and 2021. Now, though, it has excess capacity. And that led to significantly higher costs in the first quarter.
Is Amazon stock a buy after its bad news? Short-term investors might want to stay clear. Amazon expects that it could take several quarters to grow into its current capacity. That means the cost pressures will likely persist.
However, there are still reasons for long-term investors to like Amazon. Its Amazon Web Services business continues to deliver strong growth, with sales jumping 37% year over year in Q1. When e-commerce growth catches up to the company's capacity, Amazon's bottom line should improve significantly.
Don't forget Amazon's expansion into other areas. The company's moves into healthcare and self-driving car technology could pay off over the next several years.
Amazon probably won't be the growth story in the future that it's been in the past. But it still holds the potential to be a solid winner for long-term investors.