If we strictly looked at the performance of the major U.S. stock indexes, 2021 was a great year. For example, the benchmark S&P 500 logged nearly six dozen record-closing highs on its way to a 27% gain.
But dig a bit deeper and you'll find a bifurcated market. Although the broad-market indexes performed well, a number growth and value stocks took it on the chin in 2021. While no investor enjoys seeing their stocks go in reverse, patience has a way of paying off handsomely in the stock market.
In 2022, the following trio of turnaround stocks have the catalysts needed to bounce back in a big way.
Image source: Getty Images.
Zoom Video Communications
The first stock with all the tools necessary to rebound big time in 2022 is cloud-based web-conferencing juggernaut Zoom Video Communications (ZM 1.55%).
As you can imagine, Zoom was one of the prime beneficiaries of the coronavirus pandemic. With traditional workplaces disrupted by COVID-19, shares of the company catapulted from around $100 to nearly $600 in less than a year. However, the ongoing COVID-19 vaccination campaign and return to the office for some workers in 2021 left Wall Street concerned about Zoom's growth prospects. Last year, shares of the company tumbled 45%. While this drop was painful to watch, it could represent a major buying opportunity for long-term investors.
What Zoom Video brings to the table is share dominance and efficiency for businesses. Though estimates tend to vary, Datanyze lists Zoom as controlling 75% of web-conferencing market share. That's about 10 times higher than Cisco Systems' WebEx, the No. 2 company for cloud-based web-conferencing.
Zoom's platform is also improving operating efficiency in the workplace. A study from Salesforce-owned Tableau and YouGov put out last year found that workplaces utilizing Zoom's web-conferencing solutions had more inclusive meetings that quickly got to the point. Even if life begins returning to some semblance of normal in 2022, Zoom's solutions are now part of work process for companies big and small.
Additionally, the company is sitting on a mountain of cash -- about $5.4 billion as of Oct. 31, 2021. This capital can be used for acquisitions to expand or compliment an existing line of products, or to fund the rollout of new solutions, such as the company's cloud phone solutions.
Based on Wall Street's forward-year consensus, Zoom is valued at a multiple of 11 times sales and roughly 40 times earnings per share. That's considerably more attractive than where it was two years ago, and all the more reason to believe Zoom bounces back in 2022.
Trulieve Cannabis
A second turnaround stock that should have investors seeing green in 2022 is marijuana stock Trulieve Cannabis (TCNNF 2.22%).
When President Joe Biden took office last January with the support of a Democrat-led Congress, it looked promising that cannabis reform would finally take shape at the federal level. But with COVID-19 occupying the attention of lawmakers, cannabis reform was, once again, pushed to the backburner. This lack of reform was the buzzkill that crushed pot stocks in 2021. But following a halving from its 52-week high, Trulieve now has the look of a screaming buy.
Where this company has truly differentiated itself is its approach to expansion. Most multi-state operators (MSO) have had a tendency to open dispensaries or cultivation farms in as many big-dollar legalized markets as possible. Meanwhile, Trulieve has focused its efforts on dominating medical marijuana-legal Florida. Out of the 160 operating dispensaries the company has nationwide, 112 are located in the Sunshine State. Saturating the Florida market has allowed Trulieve to keep its marketing costs down, which in turn has lifted the company to three consecutive years of profits in an industry where most companies are still losing money.
We're also going to see the next step in Trulieve's evolution take shape in 2022. During the fourth quarter of 2021, Trulieve closed its acquisition of MSO Harvest Health & Recreation. Buying Harvest Health introduced Trulieve to new markets, as well as gave it the leading share of the Arizona market (Harvest Health's home market). The Grand Canyon State voted to legalize adult-use weed in November 2020, with sales commencing two months later. Cannabis could quickly become a $1 billion market in Arizona with Trulieve in the driver's seat.
With sales growth of more than 50% expected by Wall Street in 2022 and the company valued at 25 times consensus earnings, it's a good bet to reverse course.
Image source: Getty Images.
Teva Pharmaceutical Industries
A third turnaround stock that's looking to bounce back big time in 2022 is brand-name and generic drugmaker Teva Pharmaceutical Industries (TEVA -0.51%).
To be clear, Teva didn't just have a disappointing 2021. It's been a slow-motion train wreck for the past five years. Teva's shares fell 17% in 2021 and on a trailing basis are lower by 74% over the past five years. The company has contended with high debt levels after overpaying for Actavis and is now dealing with a mountain of litigation from 44 states alleging it played a role in fueling the opioid epidemic.
While these are serious challenges for the company to overcome, CEO Kare Schultz has handled the reins like a champ since taking the top job a little over four years ago. Schultz, a successful turnaround specialist, has helped divest noncore assets and reduced the company's net debt from more than $34 billion to about $22 billion. With the company's annual operating cash flow expected to remain well above $2 billion annually, the company's debt load should continue to shrink.
Teva has also gained some momentum on the litigation front. Although a New York jury found the company liable for its role in the opioid epidemic in late December, the company won a similar trial in California in early November. Any trial wins, along with the potential for appeals, could allow Schultz to negotiate a nationwide settlement that involves a minimal cash component. If Teva can provide free or reduced-price drugs as opposed to a large cash settlement, it would quickly remove the gray cloud that's hung over this stock for years.
In the meantime, Teva remains highly profitable, and it stands to benefit from more physicians, consumers, and insurers pushing for generic-medicine use. At less than four times Wall Street's consensus earnings for 2022, Teva looks like an absolute steal.
Sean Williams owns Teva Pharmaceutical Industries. The Motley Fool owns and recommends Salesforce.com, Trulieve Cannabis Corp., and Zoom Video Communications. The Motley Fool recommends Cisco Systems. The Motley Fool has a disclosure policy.
