Cathie Wood's ARK Innovation ETF has taken a beating this year. The ETF is heavily weighted toward technology-related growth stocks, and with inflation and interest rates rising, it hasn't been a good time for those companies. The fund is down roughly 63% so far this year.

Yet, there are at least two stocks in the fund's top 10 holdings that could be great long-term buys: Block (SQ 1.77%) and Teladoc Health (TDOC -3.38%). Woods has added to her positions on both companies this year and owns 6.2 million shares of Block and nearly 11.7 million shares of Teladoc. While neither company has been profitable this year, both are continuing to see revenue rise and have the capability to be profitable in the near future.

With $500, you could buy 17 shares of Teladoc or roughly seven shares of Block, both good long-term choices.

There's always something new on the Block

Block's biggest strength has been its ability to grow by staying ahead of the curve. Its primary business, Square, has gone from being a mobile payment service for small merchants to a banking company that offers businesses a host of commerce solutions.

The company's Cash App offers peer-to-peer money transfers, debit cards, direct deposits, the ability to shop and pay for items, plus the ability to use the app to invest in stocks or Bitcoin. Cash App has grown to 49 million users and is gaining on industry leader Venmo.

This year, Block added Afterpay, a buy now, pay later (BNPL) platform, and last year, the company purchased music app Tidal.

Block's shares, though, are down more than 55% so far this year. Two reasons stand out. The company is heavily invested in Bitcoin -- both directly and because of Cash App and its blockchain company, TBD -- and Bitcoin's price has tumbled this year. On top of that, after making $166.3 million in net income last year, Block has already lost $453.1 million through the first three quarters of this year.

That doesn't concern me because the other side of the coin is Block's unabated annual revenue growth -- up 697% over the past five years -- and Cash App's increased revenue from fees. Besides, the reason for reduced net income is transitory as the company pays down its expenses related to acquisitions that will eventually be accretive to its bottom line.

In the third quarter, Block reported $4.5 billion in revenue, up 17.4% year over year and 2.5% sequentially. It had a net loss of $18.7 million, but that's actually a big step in the right direction after losing $208 million in the second quarter.

The addition of Afterpay should be a boon for Block. Square and Afterpay sellers had 61 million transactions during the Black Friday-Cyber Monday long shopping weekend, and Afterpay's BNPL transactions grew 120% compared to pre-holiday sales. 

In the fourth quarter of 2021, its price-to-sales ratio was 4.2. Now, it stands at 1.9, making the stock look like a bargain.

SQ Revenue (Annual) Chart

Data by YCharts.

Teladoc benefits from its brand name

Telemedicine had a moment during the COVID-19 pandemic, but unlike some other pandemic-related plays, long-term growth in telehealth is here to stay. The shortage of medical personnel and the high costs of going to a doctor have led more people to adopt virtual doctor visits.

Teladoc's shares are down 68% this year. Admittedly, its valuation was too high during the early phases of the pandemic. Now, though, the pendulum has swung too far in the other direction with its price-to-sales ratio of 1.8 appearing quite reasonable compared to its P/S multiple of 7.2 in the fourth quarter of 2021.

Telemedicine is expected to grow at a compound annual growth rate of 14.7% through 2027, reaching a $13.5 billion market by that time, according to a report by DelveInsight. Teladoc's first-to-market brand in the space will help it ride that wave. In the third quarter, the company's revenue was $611.4 million, up 17% year over year. It cut net losses to $73.5 million, or $0.45 in loss per share, compared to an $84.3 million net loss and $0.53 per-share loss in the same period a year ago. Over the past five years, the company's annual revenue has grown by 771%.

The company said it expects fourth-quarter revenue of $625 million to $640 million and a per-share loss between $0.10 and $0.40. 

The company paid a big price, $18.5 billion, to purchase Livongo Health in 2020, but that move is becoming worthwhile to the company's bottom line. Teladoc said it had more than 10 million virtual visits the year it bought Livongo. This year, it has forecast between 18.4 million and 18.6 virtual visits.