When a stock is down 60% or more, the sellers will be vocal and the buyers will be lonely. It’s not psychologically easy to bet on beaten-down stocks, but they can offer favorable risk-to-reward profiles as there’s often more room above than below.
After all, a stock that’s 60% down would need to go up 150% to get back to breakeven. It’s a gargantuan task to get there, and the stocks that can achieve this are few and far between.
There are no guarantees, of course, but two particular stocks seem to have the essential traits of a rebound runner in the making. The idea is to gain confidence by doing your due diligence – but also maintain a moderate position size, just in case the comeback plans get derailed.
More Weekend Edition Pieces:
Finding Value Among the Ruins: Will Growth Stocks Shine Again
Palantir’s Bullish Case Remains Compelling after Big Drop
From Heroes to Zeroes: These 2 Stocks Can Make a Comeback
Teladoc Health (NYSE: TDOC)
In early 2021, Teladoc Health was a pandemic darling and TDOC stock was pushing $300. Now, analysts are predicting almost no upside for Teladoc shares. So, what changed?
A whole lot changed, actually. Vaccines were approved and distributed to the public, and COVID-19 lockdowns were lifted. Consequently, patients felt confident to visit their doctors in person. Many of them had probably been waiting a while to do that since some things just can’t be done virtually.
Also, it is surely not a coincidence that TDOC stock peaked during the height of the meme-stock hype. It’s difficult to prove this, but it’s entirely possible that Reddit traders helped push the Teladoc share price to its early-2021 apex.
In other words, the stock price never should have gone that high in the first place. By the beginning of 2022, TDOC stock traded near $95, and is now down 68% year-to-date. Is a full recovery in the cards for Teladoc stock, though?
TDOC is a great rebound pick because Teladoc is improving in many respects. For example, Teladoc’s paid U.S. member count increased sequentially in each quarter, from Q4 2021 through Q3 2022. The company’s average U.S. revenue per member also increased consistently during that time frame, and so did Teladoc’s total quarterly revenue.
Also, Teladoc’s third-quarter 2022 results indicated year-over-year improvement in key areas. The company’s revenue grew 17% to $611 million, beating Wall Street’s forecast of $608.9 million. Plus, Teladoc’s Q3 2022 net earnings loss of $73.5 million, while certainly not an ideal result, was better than the year-earlier quarter’s net loss of $84.3 million. Hence, this telemedicine specialist is closing the profitability gap and, hopefully, regaining its footing in a post-pandemic world.
What is the Forecast for TDOC Stock?
TDOC has a Hold consensus rating based on five Buys, 15 Holds, and zero Sells assigned in the past three months. The average TDOC stock price target of $34.31 implies 19.17% upside potential.
QuantumScape (NYSE: QS)
It’s easy to figure out why Teladoc stock ran out of steam, but what about QuantumScape stock? It’s down 67% year-to-date, but it’s not as if the world suddenly stopped needing lithium batteries for electric vehicles.
Most likely, the downtrend in QS stock can be explained by investors’ aversion to anything labeled as a “growth stock.” All it took was some tough talk from the Federal Reserve, and many stocks that ran hot in 2020 or 2021 were suddenly out of favor.
That’s a problem if you bought near the top, but also a terrific opportunity if you just sat on the sidelines. Analysts aren’t expecting much upside from QuantumScape stock, but perhaps they’re obsessed with the company’s financials. Unlike Teladoc, however, QuantumScape’s best argument for growth lies within the technology, not the financials.
QS stock can stage a full recovery because QuantumScape is aggressively pushing the envelope of lithium battery technology. Always the innovator and never the imitator, QuantumScape is currently developing a new generation of electric vehicle battery cells with 24 layers. The company is still in the data-gathering stage for this, but QuantumScape plans to provide an “update on this front” in the company’s next quarterly earnings call.
That’s not all that QuantumScape’s been up to, though. The company is also working on a new hybrid cell architecture with two fundamental features. These, QuantumScape explains, are a “frame that wraps around the edge
of the cell stack” and a “flexible outer layer of metalized polymer, which is similar to conventional pouch material.”
The timing is certainly right for this type of electric vehicle battery advancement. QuantumScape correctly cites the passage of the Inflation Reduction Act as an important catalyst, as it allocates significant funding toward domestic clean-energy projects. Today, with the midterm elections behind us and environment-friendly initiatives ready to move forward, QuantumScape can pursue its battery-tech development projects and QS stock can return to its early 2022 high, or perhaps even higher.
What is the Forecast for QS Stock?
QS has a Hold consensus rating based on three Holds and one Sell assigned in the past three months. The average QS stock price target of $8 implies 10.8% upside potential.
