If you were dumping your Teladoc (TDOC 0.05%) shares on Thursday after a brutal earnings report, you obviously weren't alone. The telehealth specialist saw its stock plummet 40% after announcing a bad quarter and problematic guidance. However, don't be surprised if the shares you unloaded wound up in Cathie Wood's hands.
Wood is the CEO, co-founder, and primary stock picker for the Ark Invest family of exchange-traded funds (ETFs). She wasn't doing a lot of buying with growth stocks generally rallying on Thursday, but she was a big buyer of Teladoc. She added to her stake in four different ETFs as the sell-off was happening.
Calling in sick
Wood became an industry rock star with monster returns in 2020. Her style of investing in aggressive growth stocks has fallen out of favor over the past year and change, and she has made things worse by adding to many of her sinking positions on the way down. Teladoc itself has been particularly painful. The shares have plunged 89% since peaking in February of last year.
Wood has been loading up on Teladoc. She now owns roughly 11.4% of the company across all of her ETFs. She's been trying to catch a falling scalpel, and it obviously isn't working. If Teladoc were back at its highs, the fallen medical tech stock would account for more than a third of all Ark assets.
This is a grim reminder that "buy high, buy more lower" isn't exactly a winning strategy. Sometimes buying the dip is just a case of snapping turtles all the way down. But this still doesn't have to end badly for Wood.
Teladoc is obviously in a bad place. Business is slowing, and achieving profitability has been challenging. Sustaining the initial surge in popularity that virtual medical consultations saw during the early months of the pandemic isn't easy. However, Teladoc's report wasn't as bad as the glaring headline numbers make it out to be.
Teladoc posted a huge quarterly loss this week, but the lion's share of that came from a noncash impaired asset charge. This isn't a surprise. Teladoc announced two summers ago that it would be acquiring Livongo Health for $18.5 billion, and today all of Teladoc is worth less than a third of that initial buyout price. There was a lot of bad in that goodwill figure on Teladoc's balance sheet. Impairment charges happen.
The good news is that Teladoc is still growing. Revenue rose 25% for the quarter, weaker than expected -- but still respectable growth in light of the bearish thesis that we would all abandon telehealth and rush back to in-office medical visits. It did hose down its full-year guidance. Three months ago Teladoc was calling for top-line growth of 25% to 30% in 2022, and now that target has been whittled down to an increase of 18% to 23%. It lowered the high end of the range of consultations it expects to complete this year, and other operating metrics also drifted lower.
This wasn't a good report. It wasn't even a fair report. It was bad, but keep in mind that Teladoc is now -- in terms of market cap -- a ninth of the company it was when it was hitting all-time highs 14 months ago. Telehealth continues to be a growing industry. It is getting more competitive, and analysts don't see Teladoc turning a profit until 2025 at the earliest.
We're also not necessarily at the bottom. It was a sharp downward revenue growth revision by Teladoc in just three months, and it won't surprise a lot of people if that figure keeps getting whittled lower as the year plays out. Momentum is not on Teladoc's side, and I imagine Wood is kicking herself if she's calculated how much better her ETF returns would've been without the troubled telehealth leader on her scorecard. However, this is still a growth stock posting double-digit revenue gains in a disruptive industry that continues to make sense in the new normal. Its $5.4 billion market cap is just a little more than double what its refreshed 2022 top-line guidance is now calling for. Teladoc investors aren't feeling all that hot right now, but wellness is -- after all -- what the company does.