Best growth action: Facebook or Teladoc Health?
Even popular stocks can run into problems. Facebook‘s (NASDAQ: FB) stocks have risen more than 20% since the start of the year. However, the social media giant has recently come under fire over Instagram’s potential negative effect on teenage mental health.
During this time, Teladoc Health (NYSE: TDOC) has not experienced any controversy. But the health care stock has plunged more than 50% below its highs at the start of the year. The massive sales mainly stemmed from investor concerns about the slowing rate of growth of Teladoc members.
Wall Street analysts remain very optimistic on these two growth stocks. What is the best choice at the moment? Here’s how Facebook and Teladoc compare.
The case of Facebook
The controversies swirling around Facebook could increase the likelihood of intervention by government regulators. But there are still several compelling reasons to buy the stock.
More importantly, Facebook’s business continues to grow vigorously. Revenue increased 56% year-on-year in the second quarter to $ 29.1 billion. Profits more than doubled to $ 10.4 billion.
More than 1.9 billion people used Facebook’s platforms daily in June, up 7% year-on-year. It reported monthly active users of 2.9 billion in the second quarter, also up 7% from the previous year period. Social media issues aren’t new, but people around the world are sticking to Facebook and Instagram.
Facebook could have a much bigger opportunity ahead of it than social media. The company is already a leader in virtual reality with its Oculus VR devices. He is investing heavily in harnessing his expertise in virtual reality to create the next version of the Internet: the metaverse.
Mark Zuckerberg, founder and CEO, told the company’s second quarter conference call that he believes the metaverse “is one of the most exciting projects we’re going to work on in our lives.” It could also be the biggest for Facebook. If the Metaverse meets Zuckerberg’s vision, his company’s growth could accelerate dramatically over the next two decades.
The case of Teladoc Santé
As mentioned earlier, the main problem with Teladoc at the moment is the slowdown in the growth of its members. This slowdown is hardly surprising, however, given the record year the virtual care provider experienced in 2020 due to COVID-19 lockdowns.
It is also important to note that Teladoc continues to experience strong growth in many areas. Second quarter revenue per member per month increased 142% year-on-year and 10.3% sequentially. The usage rate of the company’s telehealth platform jumped to 21.5% in the second quarter, from 16% in the period a year earlier and 19.6% in the previous quarter.
Teladoc also now has a chronic disease management platform through its acquisition last year of Livongo Health. The company has enormous cross-selling opportunities between its telehealth customers and the Livongo customer base.
Short-term growth drivers include the launch of new products such as the Primary360 platform for virtual primary care and the myStrength Complete digital mental health platform. The company also expects solid growth from 2022 through its new agreement to provide chronic care solutions to members of the large health insurer Health Care Service Corporation.
The long-term outlook looks even better. McKinsey & Company predicts the US virtual care market could reach $ 250 billion. As the clear leader in this market, Teladoc should be in an excellent position to deliver above-market gains to patient investors.
The best growth value?
I love (and own) both of these growth stocks. My take is that Facebook and Teladoc should be big winners over the next decade and beyond. But what’s the best choice right now? I think the nod goes to Teladoc.
On the one hand, Teladoc has stronger short-term catalysts while Facebook has short-term headwinds. In addition, Teladoc stock is beaten and potentially better prepared for a rebound.
While Facebook has a greater overall market opportunity with social media and metaverse, Teladoc is much smaller. I think this gives the virtual care stock more wiggle room – not just over the next 12 months, but maybe for years to come.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.