What happened
The U.S. Department of Labor announced its latest data on inflation this morning. According to the report, the Consumer Price Index rose by an unsightly 8.3% in August relative to the same period a year ago. U.S. stocks, as a result, are mostly in the red Tuesday morning.
Growth-dependent healthcare stocks are taking this news particularly hard today. As of 10:54 a.m. ET on Tuesday, shares of the continuous glucose monitoring giant DexCom (DXCM 3.66%) were down by 5.95%, the telemedicine services company Teladoc Health (TDOC 0.78%) saw its stock decline by 6.75%, and the healthcare-software company Veeva Systems (VEEV 0.04%) was lower by 3.55%.
So what
What's the common thread connecting these disparate healthcare stocks today? Wall Street is deeply concerned that red-hot inflation will curtail consumer spending in 2023, even for vital goods and services such as diabetes care, doctor visits, and clinical studies for important new drugs.
NASDAQ: DXCM
Key Data Points
Inflationary fears have weighed on the shares of DexCom, Teledoc Health, and Veeva Systems all year long. DexCom's stock is now down by 33% for the year, while Teledoc Health's stock price has sunk by 65.7%, and Veeva Systems shares have plunged by 31.9% over this same period.
Now what
Should bargain hunters take advantage of this prolonged weakness in these shares?
Among these three growth healthcare stocks, DexCom jumps off the page as the most compelling buy. Its continuous glucose monitoring devices have become a fundamental component of diabetes care; so much so that the diabetes specialist's shares might be trading as low as 2.5 times 2026 sales right now. That's dirt cheap for a company with double-digit sales growth.
As for Teladoc Health, Wall Street still isn't convinced that this telemedicine company can thrive in a post-pandemic world. That doesn't mean that Wall Street is correct in its dire take. Teladoc's shares are now trading at a mere 1.8 times 2023 estimated sales. Nonetheless, it could be a while before sentiment around this former high-flying stock changes.
Lastly, Veeva Systems' stock could continue to falter as investors take profits on premium-laden equities. Underscoring this point, the healthcare company's shares have been trading at over 11 times 2024 projected sales of late. The healthcare-oriented software company does have a bright outlook over the long term, but this premium-heavy healthcare play could struggle in the short term in this increasingly risk-averse environment.
