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2 Stocks Down 81% and 88% to Buy Right Now and Hold for the Next Decade | The Motley Fool

Two Beaten-Down Stocks Poised for a Comeback: Why Now Is the Time to Buy and Hold

In the ever-volatile world of stock investing, opportunities often arise from the ashes of market downturns. A recent analysis highlights two companies whose shares have plummeted dramatically—down 81% and 88% from their peaks—yet present compelling cases for long-term investors. These aren't fleeting meme stocks or speculative gambles; they're established players in high-growth industries with solid fundamentals that have been temporarily overshadowed by macroeconomic headwinds, competitive pressures, and shifting consumer behaviors. As we delve into the details, it's clear that patient investors who buy now and hold for the long haul could reap substantial rewards. This summary draws from expert insights, emphasizing the resilience and growth potential of these undervalued gems.

Let's start with the first stock: Peloton Interactive (NASDAQ: PTON). Once a darling of the pandemic era, Peloton's shares have cratered approximately 88% from their all-time high in early 2021. The company, known for its high-end connected fitness equipment like bikes and treadmills, coupled with subscription-based workout classes, rode a massive wave of demand during lockdowns. People stuck at home turned to Peloton for virtual spin classes and yoga sessions, propelling revenue to dizzying heights. However, as the world reopened, growth stalled. Supply chain disruptions, inventory gluts, and a return to gyms led to a sharp decline in hardware sales. Compounding this, Peloton faced internal challenges, including executive turnover, product recalls, and a pivot toward more affordable offerings.

Despite these setbacks, Peloton's core business model remains robust. The subscription segment, which generates recurring revenue from its app and content library, continues to show strength. As of the latest quarterly report, Peloton boasted over 3 million connected fitness subscribers, with churn rates stabilizing and average revenue per user ticking upward. Management has aggressively cut costs, reducing operating expenses by more than 30% year-over-year through workforce reductions and streamlined operations. This has improved gross margins and brought the company closer to profitability. In fact, Peloton reported positive free cash flow in recent quarters, a critical milestone for a growth stock that had been burning through cash.

Looking ahead, several catalysts could drive a rebound. The fitness industry is projected to grow at a compound annual rate of 7-10% through the end of the decade, driven by increasing health consciousness and the integration of technology into wellness routines. Peloton is well-positioned to capitalize on this with innovations like its Guide strength-training device and partnerships with retailers such as Dick's Sporting Goods and Amazon, expanding its distribution channels. Moreover, the company's content ecosystem—featuring celebrity instructors and diverse classes—creates a moat that's hard to replicate. Analysts point to international expansion, particularly in Europe and Asia, as untapped opportunities. With a market cap now hovering around $2 billion, Peloton trades at a price-to-sales ratio of less than 1, a bargain compared to its historical multiples and peers like Lululemon or even broader tech firms. Risks remain, such as economic slowdowns affecting discretionary spending, but for long-term holders, the upside potential far outweighs the downsides. If Peloton can return to even modest growth rates, shares could easily double or triple in the coming years.

Shifting gears to the second stock: Teladoc Health (NYSE: TDOC), which has seen its shares plunge about 81% from their pandemic-era peak. Teladoc, a pioneer in telemedicine, exploded in popularity during COVID-19 as virtual doctor visits became the norm. The company's platform connects patients with healthcare providers via video, phone, or app, offering services from primary care to mental health support. Acquisitions like Livongo, which specializes in chronic disease management, bolstered its offerings and positioned Teladoc as a comprehensive digital health powerhouse.

The downturn stems from several factors. Post-pandemic, growth normalized as in-person visits resumed, leading to decelerating revenue. Integration challenges from the Livongo merger, coupled with rising competition from players like Amazon Clinic and traditional insurers, pressured margins. Additionally, broader market concerns about inflation and interest rates hammered growth stocks, with Teladoc's valuation compressing dramatically. The company reported wider-than-expected losses in some quarters, fueling investor skepticism.

Yet, beneath the surface, Teladoc's fundamentals are strengthening. Revenue continues to climb, albeit at a slower pace, with the latest figures showing double-digit growth driven by higher utilization rates and expanded employer contracts. The chronic care segment, enhanced by Livongo's diabetes and hypertension management tools, is a standout, with retention rates exceeding 90%. Teladoc has also made strides in cost control, implementing restructuring plans that include headcount reductions and operational efficiencies, aiming for adjusted EBITDA profitability by year-end. International expansion into markets like Canada and Europe adds another layer of growth potential, as telemedicine adoption lags behind the U.S. but is accelerating globally.

The telemedicine market is far from saturated. Industry forecasts predict it will expand from $80 billion today to over $450 billion by 2030, fueled by aging populations, physician shortages, and the push for cost-effective healthcare delivery. Teladoc's data-driven approach, leveraging AI for personalized care and predictive analytics, gives it a competitive edge. Partnerships with major insurers like UnitedHealth and CVS Health ensure steady revenue streams. Currently trading at a forward price-to-sales multiple of around 1.5, Teladoc appears undervalued relative to its growth prospects. Wall Street analysts have set price targets suggesting 50-100% upside, contingent on execution and macroeconomic recovery. Of course, regulatory changes in healthcare or intensified competition could pose hurdles, but Teladoc's scale and first-mover advantage make it a resilient bet for the long term.

What ties these two stocks together is their alignment with enduring secular trends: digital transformation in fitness and healthcare. Both companies benefited immensely from the pandemic acceleration but have since faced normalization pains. However, their subscription-based models provide sticky revenue, high margins over time, and barriers to entry. Investors should note that these aren't quick flips; they're for those with a horizon of 3-5 years or more. The broader market context supports this view—interest rate cuts on the horizon could lift growth stocks, and as economic uncertainties fade, consumer spending on health and wellness is likely to rebound.

In comparison to the S&P 500, which has marched to new highs, these stocks represent deep value plays. Historical precedents abound: Think of how Amazon or Netflix recovered from dot-com busts or growth slumps to deliver massive returns. Peloton and Teladoc could follow suit if they navigate current challenges successfully. Diversification is key—don't allocate your entire portfolio here—but adding them at these depressed levels could supercharge a long-term strategy.

To wrap up, while the 81% and 88% declines paint a grim picture, they also scream opportunity for discerning investors. Peloton's pivot to profitability and content dominance, combined with Teladoc's telemedicine leadership, position them for comebacks. As always, conduct your due diligence, but the case for buying and holding these stocks right now is compelling. In a market obsessed with AI and megacaps, these under-the-radar picks might just be the hidden gems that deliver outsized gains in the years ahead.

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Read the Full The Motley Fool Article at:
[ https://www.fool.com/investing/2025/07/24/2-stocks-down-81-and-88-to-buy-right-now-and-hold/ ]