Tech SellOff: 1 Top Growth Stock Down 71% To Buy Before It Starts Soaring

Technology stocks have been hurt by the bearish market over the past 12 months as many investors seek refuge to weather the ongoing economic storm. Things have been getting worse and worse, compounded by inflation at a 40-year high, rising interest rates and questions about recessionary pressures in 2023. As a result, the Nasdaq Composite Index was penalized. A closely watched tech index has fallen 30% over the past year. Many individual stocks have fallen more sharply.

There is good news amidst the doom and darkness. Investors have an opportunity to profit during a recession, even as their paper losses mount. While the opportunities abound, Teladoc Health (NYSE:TDOC) is a prime example. The tech-focused virtual health platform, a global leader in telehealth services, reported a 71% fall in its share price despite a strong track record of sustained growth and a leadership position in the industry.

Will Teladoc be able to weather the headwinds that rocked its stock in 2022? Let's dig a little deeper to see what we can find.

If you create it, they will come

The persistent narrative over the past year has been that telemedicine's best growth is over. Strong patient demand for telemedicine services during the pandemic has slowed, giving way to more subdued growth.

However, it's important to put Teladoc's pandemic-driven growth into perspective and use pre-pandemic results as a benchmark. In 2019, Teladoc's revenue grew 32% year over year to $418 million. That growth has accelerated during the pandemic, with sales up 98% and 86% in 2020 and 2021, respectively. Difficult businesses and slower adoption have dampened rapid progress, with revenue up around 20% through the first nine months of 2022.

While its growth is certainly more modest, it's still respectable and has a long way to go.

Where will the growth come from?

Bears will soon show that the fruit in hand has already been harvested. History also claims that as the pandemic subsided, the need for telehealth services came and growth ended, but the evidence suggests otherwise.

One of the largest population groups – the baby boomers – has already reached retirement age. Known as the "silver tsunami," this trend will only increase demand for telemedicine visits and home monitoring services.

Younger patients will also stimulate growth. Millennials, Gen Z and Gen X all grew up with technology, so for these patients it comes naturally. According to the Healthcare Information and Management Systems Society (HIMSS) in their 2021 State of Healthcare Report, more than 70 percent of these younger generations say they prefer the convenience of telemedicine services over traditional doctor visits. In fact, 44 percent said they would make the switch the healthcare provider if they do not continue to offer telemedicine visits as an option.

Growth forecasts in space seem to confirm this. The global telemedicine market was valued at around US$40 billion in 2020 but is projected to reach US$432 billion by 2030, at a CAGR of about 26%. As an industry leader, Teladoc Health is well positioned to follow this century-old trend and enrich shareholders along the way.

Short-term headwinds and long-term opportunities

Of late, investors have focused on Teladoc Health's seemingly unhealthy results. For the first nine months of 2022, the company reported a net loss of more than $9.8 billion, but context is needed. In 2020, at the height of the pandemic, Teladoc bought Livongo Early Health for $18.5 billion.

This gave the company an immediate opportunity in the chronic disease monitoring market by providing personalized health coaching for patients with diabetes and hypertension, as well as weight management and behavioral health issues such as depression and anxiety. Unfortunately, this has also caused Teladoc a pain in the wallet.

As of early 2022, Teladoc had non-cash impairments totaling $9.6 billion, reflecting the lower market value of its Livongo investment. Although Teladoc's financial results have suffered in the short term, there remains an opportunity to leverage these systems for a more profitable business and the company's results are expected to improve significantly going forward.

at the moment

Overall, the evidence suggests that Teladoc Health is well-positioned to capitalize on the ever-growing, albeit slower, pace of digital healthcare adoption. Although telemedicine is not an alternative to an in-office visit in certain circumstances, it is well on its way to becoming a widely accepted standard of care for patients with non-critical conditions.

Over the past year, Teladoc has exploded by 71%. That leaves the stock in bargain territory, selling for less than double next year's sales, its lowest valuation ever .

That doesn't mean the stock can't go much lower from here. The market is full of examples that prove the opposite. However, given the company's growth record, large and growing pipeline of opportunities, and industry leadership, investors would be wise to buy the stock now, before Teladoc Health begins to grow.

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Danny Vena holds positions at Teladoc Health. Motley Fool is filling positions and recommending Teladoc Health. The Motley Fool has a disclosure policy.

Big tech companies are titans in freefall