Cathie Wood's ARK Innovation ETF (ARKK 0.07%) has fallen nearly 60% in the past six months. This should come at no surprise, though: The star stock-picker invests in high-growth companies, many of which have struggled lately due to the broader tech sell-off. Technology companies in particular have suffered stock blows due to macroeconomic headwinds like 40-year-high inflation, rising interest rates, and lingering concerns surrounding the war between Russia and Ukraine.
As a result, many of the world's most dominant and innovative companies have shed a significant amount of their value, leaving them at bargain prices. We're living in a buyers' market today; purchasing stocks at current levels could pay off remarkably well down the road. Long-term investors should take advantage of the current market by doubling down on three of Cathie Wood's favorite stocks right now.
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1. Teladoc Health
Teladoc Health (TDOC -0.07%), the pioneer in virtual doctor visits, has lost almost 75% of its market value in the past six months from a combination of macroeconomic headwinds and weaker-than-expected guidance for the remainder of 2022.
Not only were investors rattled by the company's unexpected first-quarter loss of $41.58 a share, but management also slashed full-year revenue guidance.. That notable deduction in earnings per share was primarily attributed to the $6.6 billion non-cash goodwill impairment charge for the company's earlier acquisition of remote health monitoring company Livongo. In light of the disappointing first-quarter report, investors worried Teladoc might not fulfill post-pandemic expectations, and the stock dropped nearly 50% as a result.
Even so, the company is still forecast to grow both its top line and total visits by more than 20% in 2022. The global telehealth market is projected to show a compound annual growth rate (CAGR) of 19% through 2030, lifting it to a value of $225 billion. If Teladoc can sustain just 5% of the industry by that time, the company will generate annual sales of $11.25 billion, 454% higher than its 2021 figures.
Teladoc stock is currently trading at around 2.8 times sales. Now might be the optimal time to scoop up shares of the world's leading telehealth provider.
2. Zoom Video Communications
Another Cathie Wood stock that's fallen upon tough times recently is Zoom Video Communications (ZM 0.05%). Despite delivering strong financial results, the videoconferencing stock has nosedived 63% over a six month span.
In fiscal year 2022 (ended Jan. 31), Zoom reported $4.1 billion in revenue, representing 55% year-over-year growth. Basic earnings per share hit $4.64 in FY 2022, up over 95% from the previous year's EPS of $2.37. Customers contributing more than $100,000 in annual recurring revenue (ARR) climbed to 2,725 in the final quarter, 66% more than a year ago.
With $1.1 billion in cash and debt of only $105.7 million, Zoom's balance sheet is as sturdy as they come. Cash flow is improving as well, hitting $1.5 billion to close out last year.
But while its fundamentals are improving, the company's valuation continues to shrink. Trading at just 22.8 times earnings, shares appear attractively valued today.
3. Block
The fintech disruptor Block (SQ -1.57%), formerly Square, has witnessed its share price plunge nearly 60% in six months, mostly in response to broader economic trends rather than poor financial performance. In fact, the Jack Dorsey-led firm ended 2021 on a spectacular note.
The company's total revenue finished at $17.7 billion, representing a year-over-year increase of 86%. Gross profit -- which is a better indicator of the company's financial health given that Block's top line is considerably impacted by fluctuations in Bitcoin -- grew 62% this past year, hitting $4.4 billion.
Cash App continues to serve as the epicenter of Block's growth story. In 2021, Cash App's gross profit climbed 69% year over year to $2.1 billion. Initially designed to make peer-to-peer payments simpler, the Cash App ecosystem now competes with companies in debit and prepaid cards, stock trading, tax filings, digital wallets, and Bitcoin exchange spaces, among other areas.
Block, which now trades at only 3.2 times sales, intends to revolutionize the financial services industry for consumers. That growth path, in addition to the company's enviable financials, makes Block a stock worth holding onto for the long haul.
Now what
U.S. consumer sentiment remains at a decade low, and this serves as a fantastic buying signal for shrewd investors. Teladoc, Zoom, and Block have all had their stock prices shattered by Mr. Market recently. But besides a few growing pains, all three of these companies are fundamentally sound and enjoy long runways for growth. It wouldn't be unwise to follow Cathie Wood's lead and double down on these three innovators.
