Better Growth Stock: Facebook or Teladoc Health?
- Facebook faces controversy right now but also has significant growth prospects.
- Teladoc should have several near-term growth drivers and targets a market that could grow tremendously.
- Both stocks should be winners over the long run, but one of them appears to have more room to run.
Even popular stocks can encounter problems. Facebook's (NASDAQ:FB) shares are up more than 20% year to date. However, the social media giant has come under fire lately about the potential negative effect of Instagram on teen girls' mental health.
Meanwhile, Teladoc Health (NYSE:TDOC) hasn't experienced any controversy. But the healthcare stock has plunged more than 50% below its highs from earlier this year. The sell-off stemmed primarily from investors' worries about Teladoc's slowing rate of member growth.
Wall Street analysts remain very bullish about both of these growth stocks. Which is the better pick right now? Here's how Facebook and Teladoc stack up against each other.
The case for 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.
Most importantly, Facebook's business continues to grow robustly. Revenue soared 56% year over year in the second quarter to $29.1 billion. Profits more than doubled to $10.4 billion.
Over 1.9 billion people used Facebook's platforms on a daily basis in June, up 7% year over year. It reported monthly active users of 2.9 billion in the second quarter, also up 7% from the prior-year period. The issues surrounding social media aren't new, yet people across the world remain glued to Facebook and Instagram.
Facebook could have a much greater opportunity ahead of it than social media. The company is already a leader in virtual reality with its Oculus VR devices. It's investing heavily in leveraging its VR expertise to create the next version of the internet: the metaverse.
Mark Zuckerberg, the founder and CEO, said on the company's second-quarter conference call that he thinks the metaverse "is one of the most exciting projects that we're going to get to work on in our lifetime." It could also be the biggest for Facebook. If the metaverse fulfills Zuckerberg's vision, his company's growth could accelerate tremendously over the next two decades.
The case for Teladoc Health
As previously mentioned, Teladoc's main problem right now is its slowing membership growth. This slowdown isn't really surprising, though, considering the banner year that the virtual-care provider enjoyed in 2020 due to the COVID-19 lockdowns.
It's also important to note that Teladoc continues to deliver strong growth in multiple areas. Revenue per member per month in the second quarter soared 142% year over year and 10.3% sequentially. The utilization rate for the company's telehealth platform jumped to 21.5% in the second quarter from 16% in the prior-year period and 19.6% in the previous quarter.
Teladoc also now has a chronic-disease management platform thanks to its acquisition last year of Livongo Health. The company has tremendous opportunities to cross-sell between its telehealth customers and Livongo's client base.
Near-term growth drivers include the launches of new products such as the Primary360 platform for virtual primary care and digital mental health platform myStrength Complete. The company also expects solid growth beginning in 2022 from its new deal to provide chronic-care solutions to the members of large health insurer Health Care Service Corporation.
The long-term prospects look even better. McKinsey & Company projects that the U.S. virtual-care market could expand to $250 billion. As the clear leader in this market, Teladoc should be in a great position to deliver market-beating gains for patient investors.
The better growth stock?
I like (and own) both of these growth stocks. My view is that Facebook and Teladoc should be big winners over the next decade and beyond. But which is the better choice right now? I think the nod goes to Teladoc.
For one thing, Teladoc has stronger near-term catalysts while Facebook has near-term headwinds. Also, Teladoc stock is beaten down and potentially better poised for a rebound.
Although Facebook has a greater overall market opportunity with social media and the metaverse, Teladoc is much smaller. I think that gives the virtual-care stock more room to run -- not just over the next 12 months but possibly for years to come.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.