The stock market might not look so attractive right now, with the S&P 500 down 18% so far this year. But even good businesses with strong fundamentals experience ups and downs. It doesn't mean these stocks should be abandoned. History tells us a distressed market creates investment opportunities. And growth stocks usually need time to show their full potential. With a little bit of patience, even a small investment can turn into a fortune.
I believe healthcare stocks Teladoc Health (TDOC -0.07%) and Exelixis (EXEL 1.80%) and rising cannabis company Trulieve Cannabis (TCNNF 2.03%) have tremendous potential in the long run. Let's dig into why these three beaten-down growth stocks are good buy-and-hold investments.
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Teladoc Health
This virtual healthcare stock has plunged 79% from its 52-week high, but that doesn't make it a bad investment. Teladoc surged amid the pandemic as virtual healthcare services demand spiked. But as the markets are reopening, investors are skeptical about whether demand for telehealth services will sustain.
I believe this is a good company with long-term potential. It continues to bring in new customers and drive revenue. In the first quarter, revenue came in at $565 million, a jump of 25% year over year, driven by demand both in the U.S. and internationally. Total visits for the quarter rose 35% to 4.5 million.
Q1 also saw a huge net loss, but management attributed the loss to a goodwill impairment charge of $6.6 billion. I wouldn't worry too much about this, as it seems to be a one-time charge. Teladoc expects a revenue jump of 20% this year and total visits to be around 19 million, versus 15.4 million in 2021.
Telehealth services could offer an enjoyable and stress-free medical experience, saving time and money for patients. Moreover, the global telemedicine market could grow at a compounded growth rate of 18.7% by 2028 -- which is why I believe Teladoc's business won't fade away even in the post-pandemic era.
Exelixis
Biotech stocks have gotten hammered this year, but Exelixis' continued impressive performance every quarter gives me faith that it has a bright future. Its recent first-quarter results are a testament to that.
The star of this oncology-based drugmaker is Cabometyx (cabozantinib), which is used to treat advanced renal cell carcinoma (RCC), among other cancers. The drug is also used in combination with Bristol-Myers Squibb's drug Opdivo (nivolumab) to treat advanced RCC in patients who haven't received any prior treatment for the disease.
Cabometyx brought in $1 billion in revenue in 2021. In combination with Opdivo, it contributed the highest amount (around $303 million) to total revenue of $356 million in Q1. Another formulation of cabozantinib, Cometriq, used for the treatment of thyroid cancer, also contributed around $7.4 million in the quarter. Adjusted net income grew at an extreme rate from $28 million in the prior quarter to $84 million in Q1.
The oncology drugmaker stated that it looks forward to "top-line results from COSMIC-313, CONTACT-01 and CONTACT-03 pivotal phase 3 clinical trials expected over the course of this year."
For 2022, the company expects revenue to be in the range of $1.5 billion to $1.6 billion. The company ended the quarter with cash, cash equivalents, restricted cash equivalents, and investments of $2 billion which could support its pipeline progress.
Trulieve Cannabis
From a small medical cannabis company in Florida, Trulieve has now grown to operate 165 dispensaries in 11 states. Trulieve played it smart by focusing on its home state market and then spreading its wings to other states.
It now dominates the Florida market with 114 stores (and four more upcoming this year), which will play to its advantage when the state legalizes recreational cannabis. While profitability is still a struggle for its Canadian counterparts, Trulieve's operating profits have been consistent for 15 consecutive quarters.
In its recent first quarter, adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) came in at $105 million, a 16% jump from the prior-year period.
Revenue growth of 64% year over year to $318 million brought in these operating profits. However, the company reported a net loss of $32 million compared to a net income of $30 million in the year-ago quarter, which is related to the purchase of Harvest Health & Recreation last year.
This acquisition will make Trulieve a stronger cannabis company with a solidified presence in Arizona, Pennsylvania, and Maryland cannabis markets when it comes to fruition. It ended the quarter with a positive cash flow from operations of $45.1 million and a cash balance of $267 million, which will help fuel its expansion plans this year.
Trulieve expects another robust year with revenue in the range of $1.3 billion to $1.4 billion, and EBITDA could be in the range of $450 million to $500 million. With state legalization ramping up, it is poised to grow exponentially once the national market widens.
Average Street analysts have a "buy" rating for all three. Healthcare stocks are defensive in nature and are not dependent on the condition of the economy. People will still get sick and require treatment, which will continue driving growth for the companies. The same goes for cannabis, which has both medicinal and recreational benefits. That's why now could be the right time to buy these growth stocks at a bargain now.
