Teladoc Health (TDOC -0.52%) and Novavax (NVAX 0.63%) shares have traveled a similar road. In the early days of the pandemic, both stocks soared. Investors bet on Teladoc winning more and more customers as people avoided crowds and turned to virtual medical visits. And they bet on Novavax's ability to bring a coronavirus vaccine to market.
Since then, the path has gotten bumpy for both stocks. Investors worried that Teladoc's successes wouldn't last beyond the pandemic. And they lost faith in Novavax after it took longer than expected to bring its vaccine to market. So far this year, both stocks have tumbled more than 70%. But there's still reason to believe they'll eventually bounce back. They could even double. Which one is more likely to do it first? Let's find out.
The case for Teladoc
First, it's important to say Teladoc has given investors reason to be disappointed in recent times. The telehealth leader announced two enormous non-cash goodwill impairment charges linked to its purchase of Livongo. This has pushed Teladoc further from profitability.
But it's also important to say that once the effect of these charges is over, Livongo's chronic care products could become significant revenue drivers over time. That's because chronic care is a key growth area for Teladoc. The chronic care business has led to enrollment in multiple programs and client retention, for example.
Teladoc has also shown that its growth isn't just a coronavirus phenomenon. The company's revenue was already on the rise prior to the pandemic.
And even during these later stages of the pandemic -- when business has returned to normal in most places -- revenue and visits are climbing in the double digits.
Another element to note is Teladoc's progress in two significant areas. I'm talking about U.S. paid members and revenue per member. These metrics have climbed steadily from the second quarter of last year through the second quarter of this year. Growth here should help Teladoc continue to increase overall revenue.
As for valuation, Teladoc is trading at 1.7 times sales. That's its cheapest ever by that measure.
The case for Novavax
Novavax has also given investors reason to frown. The company's coronavirus vaccine launched a full year behind those of leaders Pfizer and Moderna. And that launch was outside of the U.S. The U.S. Food and Drug Administration authorized the Novavax vaccine several months later.
All of this means Novavax missed out on a major revenue opportunity. Most of the population that wanted a vaccine got one before the Novavax product won authorization.
But there is a definite silver lining in this dark cloud. Novavax is furthest ahead in the development of a key product for future vaccination. The company is working on a combined coronavirus and flu vaccine candidate.
Novavax recently said that this candidate performed well in a phase 1/2 trial. It spurred antibody and T-cell responses against both viruses. The company plans on launching a phase 2 confirmation trial later this year. Moderna is also developing a combined vaccine. But the Moderna candidate isn't as advanced. It recently entered a phase 1 trial.
If things go smoothly for Novavax, it could enter the market first with a combined vaccine. So, why does this product stand out? Because it includes flu protection, it could attract those who regularly go for flu shots. That's about half of the U.S. adult population.
Novavax stock has fallen nearly to the level it was at around the time the coronavirus vaccine race started. So it's given up most of its gains. Yet today, it has a commercialized product, and its combined coronavirus-flu candidate offers future growth potential.
Which stock may double first?
Both Teladoc and Novavax look cheap right now considering long-term prospects. But both stocks remain risky -- after such massive declines, some investors may want to see a few more earnings updates before jumping into these stories.
Still, aggressive investors might give at least one of these stocks a try today. That's to get in on the story ahead of a potential rebound.
It's impossible to guarantee Teladoc and Novavax will double. But if their growth doesn't stumble, a doubling of the stock prices from here clearly could happen. Which could do it first?
Novavax's coronavirus vaccine hasn't been able to carve out much market share. It looks like the next major catalyst for the company could be the combined vaccine. That may be big. But we'll probably have to wait a couple of years for the product to reach the finish line.
I think Teladoc has an advantage over Novavax. It doesn't have to wait for a specific program to serve as a catalyst. Right now, revenue and visits are growing, and the company is already a market leader. These elements could help Teladoc stock to become the first to rebound -- and double.