These stocks disappointed investors, but still have trends on their side
There’s no doubt that growth investors have not been disappointed with the market performance over the last two years. Even a bear market in the early part of 2021 didn’t last long. And that was good news for many growth stocks.
However, every investor can relate to picking one or more stocks that didn’t pan out. Coming off a disruptive year in 2020, there were many stocks that were among the largest pandemic winners that had a difficult time repeating that performance in 2021.
Here are three stocks whose fortunes didn’t match up with investors’ expectations in 2021 but have a bullish outlook in 2022.
1. DocuSign
In fairness, until the last month of the year, DocuSign (NASDAQ:DOCU) was having another great year. In mid-summer, DOCU stock was trading at its 52-week high and was up 41.5% for the year. But since then, the stock is down 50% and most of that has come in December with the stock down 32.9%.
One concern that analysts have is that DocuSign’s growth is not sustainable. So even though the company beat on both earnings and revenue, it wasn’t enough to overcome concerns of slower growth in the year ahead.
But there are two things that opportunistic investors should keep in mind. First, DocuSign is still retaining its customer base. And that’s important because some analysts believe that the company’s e-signature services do not have a wide enough moat to stand out from the competition.
And second, the idea that DocuSign was a pandemic stock is a misplaced narrative. DocuSign was growing heading into the pandemic. While it’s fair to say that the pandemic accelerated that growth, the company’s services aren’t about public health concerns, but about common sense and convenience.
Despite several lowered price targets, DOCU stock still has a consensus price target of $248.56 which is a 58% gain from its current price.
2. Teladoc Health
Unlike DocuSign, Teladoc Health (NYSE:TDOC) was clearly a pandemic winner. The company was growing revenue at a steady pace prior to the pandemic. However, when patients were literally unable to visit their physicians in person, Teladoc saw strong revenue growth.
But the company is not yet profitable, and investors are concerned about the company’s ability to continue its rate of revenue growth.
However, for investors who are willing to take a step back, the fundamental business case for Teladoc Health remains strong. First, the idea of videoconferencing with your physician is not necessarily unwelcome; just uncommon. For sure, it’s not a solution that fits every situation, but it can be an efficient, cost-effective option for many patients, particularly those with chronic conditions. And that means that health insurers will strongly support Teladoc’s business model.
Second, one of the drags on earnings was the company’s acquisition of Livongo Health (NASDAQ:LVGO). However, Livongo’s expertise in artificial intelligence will put another tool in the physician’s toolbox in terms of helping patients manage their personal health.
Analysts give TDOC stock a 12-month price target of $178.75 which would be an 87% gain from the stock’s current price.
3. Skillz
Skillz Platform (NYSE:SKLZ) went public in May 2020 and by the end of 2020 SKLZ stock had doubled. The mobile game platform operator was part of the meme stock movement and soared to over $40 a share in early February.
But that seems like ancient history to investors as it is trading below the psychologically important $10 level. And analysts will point to the fact that this is still a young company that is currently burning through more money than its bringing in. That was a risk many investors were willing to take in the first part of the year, but not so much today.
However, if you have a long-term timeframe, Skillz has an intriguing business model. The company is committed to giving game developers a platform to launch their content. And Skillz claims that its platform enables developers to monetize their content 5x better than relying on ads or in-app purchases.
And the fact that the Skillz platform hosts and operates gaming tournaments promotes social competition with up to 40 million users on the platform at a time.
Analysts give SKLZ stock a consensus price target of $23.06 which would be a gain of 195% from its current price.