Growth stocks can generate substantial returns if the underlying business is successful over time. These companies frequently operate in industries that have hyper-growth prospects, such as technology, energy, cannabis, biotech, and healthcare.
These companies may introduce new products, services, or technologies to meet emerging consumer needs or transform traditional business models, which may take time to become a success. As a result, investors who choose growth stocks should be willing to take on the risk and have a longer investment horizon.
Here are two beaten-growth stocks, trading far below their 52-week highs, that Wall Street believes have enormous potential.
#1. Advanced Micro Devices
Amid the artificial intelligence (AI) boom, semiconductor companies have grown at an impressive rate. With a market cap of $221.3 billion, Advanced Micro Devices (AMD), also known as AMD, is a leading global semiconductor company known for its innovative graphics cards, processors, and other software solutions.
AMD stock has been a standout performer in the semiconductor industry. AMD's share price has increased by 346.2% in the last five years. However, AMD stock is down 4.6% year to date, compared to a 13.8% gain for the tech-heavy Nasdaq Composite ($NASX). The chip stock is down 38.2% from its 52-week high, making now a good time to buy a dip.
AMD's Ryzen and EPYC processors and its Radeon graphics cards have been particularly popular with consumers, gamers, and enterprise customers. The company competes closely with the chip giant Nvidia (NVDA).
AMD's Data Center segment grew by 115% year on year (YoY) in Q2, reaching $2.8 billion. The Client segment's revenue also increased by 49% to $1.5 billion. However, revenue in the Gaming and Embedded segments declined by double digits. Adjusted earnings per share increased 19% to $0.69.
The company's balance sheet remains strong, with more than $5.3 billion in cash, cash equivalents, and short-term investments, as well as a manageable $1.7 billion in debt. Free cash flow generation was also strong in Q2, at $439 million, giving AMD the financial flexibility to invest in R&D, acquisitions, and strategic partnerships. The company has also expanded its AI portfolio with "new CPUs, GPUs, NPUs, and software offerings" that might contribute to its revenue and earnings in the coming years.
Recent strategic acquisitions have brought AMD into the spotlight. In August, it paid $665 million for Silo AI, a private AI lab. With this acquisition, the company intends to accelerate the development and deployment of "cutting-edge AI models, platforms, and solutions for large enterprise customers."
The company recently announced plans to acquire ZT Systems, a provider of hyperscale AI systems, as part of its long-term AI strategy. The transaction is valued at $4.9 billion in cash and stock. This acquisition is expected to strengthen AMD's Data Center segment.
Analysts expect AMD's full-year 2024 revenue and earnings to grow by 12.9% and 27.5%, respectively. In 2025, revenue and earnings are expected to further increase by 28.1% and 60%, respectively.
With its strong financial performance, innovative product offerings, and strategic focus on high-growth markets, AMD is well-positioned to continue its upward trend in the coming years.
What Does Wall Street Say About AMD Stock?
Overall, Wall Street is bullish about chip stocks’ future amid the AI boom, and the consensus rates AMD a “strong buy.” Out of the 36 analysts in coverage, 29 rate it a “strong buy,” while one recommends a “moderate buy,” and six suggest a “hold.”
Based on analysts' average price target of $192.88, Wall Street sees a potential upside of about 35.1% over the next 12 months. Wall Street has assigned a high target price of $265 for AMD, which implies a potential price jump of roughly 85% from current levels.
#2. Teladoc Health
With a market cap of $1.25 billion, Teladoc Health (TDOC) is a small-cap healthcare company that has established itself as a leader in the telemedicine and virtual healthcare industry. Its virtual platform covers multiple areas of healthcare, including primary care, mental health, and chronic condition management.
So far in 2024, Teladoc stock has dipped 64.8%, compared to the S&P 500 Index's ($SPX) gain of 15.9%. Currently, TDOC is down 67.3% from its 52-week high.
Teladoc's business peaked during the global pandemic when telehealth services became increasingly popular. The stock hit an all-time high of more than $300 per share. The stock has since fallen sharply, as investors were concerned that the post-pandemic market would halt telehealth services. While the business isn't thriving yet, Teladoc has made every effort to keep it going.
The company has two reportable segments: Teladoc Health Integrated Care, which increased revenue by 5% YoY in the second quarter. The BetterHelp segment's revenue fell 9%. Total revenue fell 2% YoY to $642.4 million. The net loss per share stood at $4.92, up from $0.40 the year before. While the loss is huge, it includes a one-time goodwill impairment charge of $790 million, or $4.64 per share.
Management expects 2024 revenue to grow by low single digits to mid-single digits. By comparison, analysts expect revenue to fall 1.8%, accompanied by a loss of $1.21 per share.
What Does Wall Street Say About TDOC Stock?
Overall, Wall Street rates TDOC stock a “moderate buy.” Out of the 25 analysts that cover TDOC, five rate it a “strong buy,” while one recommends a “moderate buy,” and 19 suggest a “hold.”
Based on analysts' average price target of $10.65, Wall Street sees a potential upside of about 38.1% over the next 12 months. Wall Street has assigned a high target price of $19 for TDOC, which implies a potential price jump of 146.4% from current levels.
The global telehealth and telemedicine market is expected to grow at a compounded annual rate of 23.2%, reaching $285.7 billion by 2028. Teladoc, with its comprehensive platform, is well-positioned to capitalize on the long-term potential of the virtual healthcare industry.
Despite the expected upside, given that the company remains unprofitable, I would advise waiting for its financials to improve before making any investment decisions.
On the date of publication, Sushree Mohanty did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
