The stock market has dealt investors a tough hand in recent months, with high highs and low lows, and stark day-to-day transitions becoming the norm. In many cases, growth-oriented businesses have been dealt the most volatile hand of all. While 2023 may be signaling a turnaround, many growth stocks are still trading down starkly from all-time highs.
Whether the volatility resolves in the coming weeks or months or stretches longer into the new year, strong businesses with clear paths to sustainable growth can continue to rise.
Here are two such stocks that could present investors with compelling buying opportunities in the current market and well beyond.
Image source: Getty Images.
1. Pinterest
Pinterest (PINS -0.32%) has faced a tough environment over the past year as changes in ad spending, the source of the company's revenue, and a slowdown in user growth from the peak of the pandemic have affected its business. It's important to take each of these concerns one by one.
The pullback in dollar spending on digital advertising has affected just about every company with exposure to this space. These are relatively short-term headwinds, both in terms of a potential recessionary environment and when compared to the long-term trajectory of the digital advertising space.
As for the slowdown in user growth, it would have been wholly untenable to expect Pinterest to keep up the user growth it reported at the peak of the pandemic indefinitely, a period in which much of the world was stuck at home with little else to do in their free time except to scroll the internet for hours on end.
However, 2022 saw Pinterest not only return to user growth, but in the final quarter of the year, it returned to profitability. It's also important to note that user growth isn't the only metric that investors should keep an eye on. In fact, how the company is monetizing its users is arguably even more important, as this indicates the success of its advertising model and the value it provides to merchants who advertise on its platform.
In the full-year 2022, Pinterest reported revenue of $2.8 billion, an increase of 9% from 2021. Separated by region, revenue in the U.S. and Canada, Europe, and the rest of the world grew by respective amounts of 8%, 4%, and 52% from the prior year. Now, Pinterest closed 2022 with a total of 450 million monthly active users. That figure represented an increase of 4% from the monthly active user count Pinterest finished 2021 with. Meanwhile, total average revenue per user rose by 10% in 2022 compared to 2021.
And, looking back over a longer period, if you compare Pinterest's growth in the full-year 2022 to the full-year 2019, its revenue jumped 145% on a three-year clip. Monthly active users jumped 34% in 2022 compared to 2019, while average revenue per user soared 67% on that same three-year basis.
Pinterest remains well positioned to capitalize on the growth of digital spending in the years ahead with its image-focused platform that can easily transition users from searching for an idea to clicking on an ad for a product or service to completing the journey with a purchase. That business model, and the continued growth of its platform in an increasingly competitive environment which is still facing economic headwinds, make the stock a worthy contender for a long-term investor's diversified portfolio.
2. Teladoc
Teladoc (TDOC -3.17%) has garnered mixed reactions from investors over the past year, although the fact that the stock is trading up by roughly 41% since the start of 2023 may indicate that sentiment is turning. The company has had a number of headwinds to contend with recently, some tied to its underlying business and some which have not been.
Generally speaking, investors have had a few major concerns about the company recently. One has been the company's unprofitability, worsened by the nearly $10 billion in impairment charges Teladoc reported in the first half of 2022, which wrote down the value of its prior Livongo acquisition. There also seems to be uncertainty among some investors as to the longevity of the business itself within the broader telehealth environment now that much of the world has reopened.
There's no denying how painful those steep losses were to witness as an investor last year. Even though these stemmed from Teladoc overpaying for Livongo at the height of the pandemic -- a time when arguably, many acquisitive companies paid premiums for their targets -- the outcome of the integration of these companies remains key to its long-term vision to build out its platform as a one-stop shop for full-service virtual care.
As for the future of telehealth, this multibillion-dollar space is continuing to grow at a rapid clip, as healthcare consumers and healthcare providers spur adoption forward. There are also other durable tailwinds, such as shortages in skilled medical workers, an aging population, and the ease and affordability of telehealth solutions that make these kinds of platforms an incredibly attractive option for both patients and providers.
Given Teladoc's position at the forefront of this space, it follows that the company can directly profit from these long-term trends. It's also worth pointing out that Teladoc's net losses were narrowing as of the third quarter of 2022, while the company was growing revenue steadily both on a year-over-year basis as well as compared to pre-pandemic levels.
After reporting roughly $10 billion in net losses in the first half of 2022, Teladoc reported a much smaller net loss of $73.5 million in the third quarter. And, while Teladoc's revenue of $611.4 million for the three-month period represented a healthy increase of 17% on a year-over-year basis, its top line rose more than 340% on a three-year clip compared to the third quarter of 2019.
Investors may still need to be patient with Teladoc for the next few quarters. Beyond primary care solutions, Teladoc is also witnessing rising adoption of its chronic care and mental healthcare services, two of the fastest-growing yet still underserved segments of the broader healthcare industry. This can provide an untold opportunity for the business over the next decade and beyond, and investors who stay along for the ride can benefit as well.
