3 Beaten-Down Growth Stocks To Buy Now
Your search for promising stocks with growth potential ends here.
Investing in growth stocks can be a great way to earn life-changing wealth in the stock market. Growth stocks refer to stocks that are expected to grow at a faster rate than the industry average or the average rate of the industry in the given country. So read on to find out more about the three beaten-down growth stocks to buy now.
A stock is called a growth stock if it meets two main requirements. First, the company operates in an industry growing faster than the average growth rate driven by increased penetration or adoption rate among its customers. Second, the company has innovative products or services catching up in the market faster than its peers. This would give the company a competitive advantage over its peers.
While the earnings of some companies may be depressed during periods of slower economic improvement, growth companies can potentially continue to achieve high earnings growth regardless of economic conditions.
The key, of course, is to know which growth stocks to buy and when. To help you get started, here is a handy guide to the best stocks to buy at the moment.
3 Beaten-Down Growth Stocks To Buy Now
- Teladoc (TDOC)
- ASOS (ASC)
- Vertex Pharmaceuticals (VRTX)
1. Teladoc (TDOC)
Teladoc Health (TDOC) served investors well during the coronavirus bear market. TDOC stock began 2020 at just under $84 a share. It ended the year in history at $199.96, up 138%. Notably, at the start of February 2021, it had reached nearly $300, 262% higher than it was at the beginning of 2020. However, Teladoc shares have fallen close to 50% from the highs set in February. The company's market cap currently stands at around $22 billion.
There are a couple of primary explanations behind Teladoc's dismal stock performance since February. First, investors began shifting from growth stocks to more risk-averse picks earlier this year. Second, some are concerned about Teladoc's growth rate slowing.
The first factor is merely a cyclical phenomenon that should only impact Teladoc's share price temporarily. The second issue requires considering the context. Teladoc is coming off an unprecedented wave of growth in 2020 due to the COVID-19 pandemic. Therefore, it would be surprising if the company's growth rate did not slow somewhat.
Notably, Teladoc's growth continues to look impressive on several key fronts. In the second quarter, revenue per member per month soared 142% year over year and 10.3% quarter over quarter. Utilization rose to 21.5% from 16% in the prior-year period and 19.6% in the first quarter of 2021. The company's number of visits jumped 27.5% year over year and 10.2% sequentially.
More importantly, Teladoc's long-term growth prospects remain exceptionally strong. Consulting firm McKinsey & Company projects that the virtual care market will expand to $250 billion annually in the US alone. Teladoc is currently one of the most prominent players in virtual care yet still has less than 1% of that massive potential market.
2. ASOS (ASC)
ASOS was another company that benefited from the COVID-19 pandemic due to shoppers choosing online platforms. This meant that active customer numbers have now reached over 26 million, up from around 20 million this time last year.
Throughout 2020, ASOS shares outperformed the FTSE 100 index by approximately 77%, excluding any dividends. Although its share price did fall in the March 2020 equity sell-off, ASOS’s business model is built around the internet, which put it in a good position as the coronavirus pandemic forced consumers to shop online amid stay-at-home measures.
ASOS’s business model is two-sided. It functions as a platform, connecting fashion brands with online shoppers, and generates product revenue from its private labels. Second, ASOS collects its users' data and provides each shopper with recommendations based on their styles. This technique of personalization has attracted ever-growing numbers of users to the site. In turn, this has brought in higher-quality clothing brands.
ASOS also focuses on its customer service to ensure brand loyalty in an increasingly competitive online retail space. This includes always adding new items and brands, customer support, next-day delivery, and free returns. More recently, ASOS has captured its ever-growing market share by delivering its private labels, which are often more affordable than the other retail brands on offer. This provides cheaper options for customers, as well as another income stream for ASOS.
Although the high street may see a renewed lease of life after COVID-19, it is still likely that many shoppers will continue to use online retailers more than they did before. This could see ASOS experience further growth in the future.
3. Vertex Pharmaceuticals (VRTX)
Vertex Pharmaceuticals Incorporated is a Boston, Massachusetts-based biopharmaceutical company with over $49 billion market capitalization. Since the beginning of the year, VRTX delivered a -19.05% return, extending its 12-month losses to -35.18%. However, in its Q1 2021 investor letter, ClearBridge Investments had mentioned Vertex Pharmaceuticals Incorporated and shared their insights on the company.
Lead Independent Director Bruce Sachs recently bought a whopping $3.0m worth of VRTX stock at a price of $198. That increased their holding by 57%, which arguably implies a bright future.
Investors also take confidence from the longer-term picture of insider transactions. Insiders likely see value in Vertex Pharmaceuticals shares, given these transactions (along with notable insider ownership of the company). The future of this firm looks promising. So if you are interested in Vertex Pharmaceuticals, now is the right time to buy its stocks.
Growth stocks saw immense growth in the year 2020. Yet, many have struggled significantly now. But these 3 beaten-down stocks are likely to outperform their peers in the near future, making now a good time to invest in them.
Investors are advised to perform due research before buying any stock as the market can be volatile at times. If you are a novice investor, consider seeking professional or expert advice before investing large amounts of money.
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