Shares of Livongo Health (NASDAQ:LVGO) were tumbling 5.2% lower as of 11:25 a.m. EDT on Monday while shares of Teladoc Health (NYSE:TDOC) were down 6.3%. The declines came after Stifel analyst David Grossman downgraded Livongo from a buy recommendation to a hold.
Since Teladoc and Livongo announced plans to merge earlier this month, the two healthcare stocks have been joined at the hip. When one goes down, the other marches in lockstep. It makes sense, therefore, that bad news for Livongo would also negatively impact Teladoc.
However, the news in this case doesn't really seem to be all that bad. Stifel already had a hold recommendation for Teladoc. It's not surprising at all that the firm would change its recommendation of Livongo to be the same. Also, David Grossman kept his price target for Livongo at $137. After today's decline, the stock is below that level.
Analysts' downgrades should be taken with a grain of salt, though. Wall Street analysts typically focus more on the short term than the long term. The long-term prospects for Livongo and Teladoc appear to be strong.
The Teladoc-Livongo merger is expected to close later this year. Both companies should report quarterly updates before then. With the COVID-19 pandemic driving increased demand for telehealth and remote chronic disease management, don't be surprised if the pullback for these two stocks is relatively short-lived.