Equity markets are full of bargains -- stocks that have performed terribly in recent months, whether due to trade-related marketwide issues or company-specific troubles, but could bounce back once things improve. There are also companies that are not performing well and are unlikely to rebound anytime soon; that's the kind investors should stay away from.
Let's consider one stock in each category: Moderna (MRNA 5.58%), a beaten-down stock with decent prospects, and Teladoc Health (TDOC 2.00%), one whose future looks dim.
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The beaten-down stock to buy: Moderna
Until about five years ago, mRNA vaccines were just a promising idea. Thanks to the success of COVID-19 vaccines, one of which was developed and marketed by Moderna, the mRNA field has proven it can deliver.
That's what makes Moderna's prospects attractive. The company's shares have lagged the market over the past three years since it no longer generates the kinds of earnings it did in the early pandemic days. However, Moderna has made significant clinical progress since. A year ago it earned approval for mResvia, a respiratory syncytial virus vaccine.
Moderna also has a deep pipeline of potential products, and could see its portfolio of approved vaccines transformed in the next five years.
Among the more promising is mRNA-4157, a potential personalized cancer vaccine. This product showed strong results in phase 2 studies: It reduced the risk of recurrence and death in melanoma patients in combination with Merck's cancer drug Keytruda, compared to Keytruda alone. It's now undergoing a phase 3 study in melanoma. Moderna is also targeting other forms of cancer with mRNA-4157 -- the drug is being investigated in no fewer than six phase 2 or phase 3 studies.
Moderna also has a promising stand-alone influenza vaccine and a combined COVID/flu shot that are both inching closer to approval.
The biotech should remain a leader in the COVID vaccine market. Its $2 billion revenue guidance (at the midpoint) largely reflects its work in this field. Moderna is also working on cost-cutting efforts; it plans to reduce between $1.4 billion and $1.7 billion in operating expenses by 2027. By then, the company should have at least one other growth driver in its lineup, and possibly several.
With stronger revenue, lower costs, and a pipeline of mRNA vaccines that are faster to develop than traditional ones, Moderna could go on to perform well and deliver excellent returns. The stock might be down substantially over the past three years, but it isn't out of the picture yet.
The beaten-down stock to avoid: Teladoc Health
Teladoc Health is a telemedicine specialist that rose in popularity in 2020 and 2021, when people were stuck at home and forced to turn to telehealth for medical attention. Though virtual care hasn't disappeared since then, Teladoc isn't performing as well as it once was. The company's revenue growth has slowed to a near halt. It also remains unprofitable, despite strong gross margins in the neighborhood of 70%.
That was on display again in the first quarter. Revenue for the period was down 3% year over year to $629.4 million, while the net loss per share was $0.53, worse than the $0.49 reported in the year-ago period.
In fairness to Teladoc, this net loss included a non-cash goodwill impairment charge related to a recent acquisition. Still, the company has had similar charges that led to catastrophic bottom-line numbers more than once in the past few years. An isolated event might not be a big deal, but it no longer feels that way with Teladoc. Furthermore, total visits declined compared to the first quarter of 2024.
The company has faced several headwinds, including a ruthless competitive landscape. Its therapy service, BetterHelp, is a good example. Though it was once Teladoc's biggest growth driver, BetterHelp has been losing members. In the first quarter, subscribers declined by 4% year over year to 397,000.
Teladoc Health has various ideas to turn things around, including investing in its international expansion plans. But if it couldn't dominate the market in the U.S., can it do so elsewhere? In my view, the stock looks too risky for investors to jump in right now. Teladoc may one day once again crack the code to success. Until then, it's best to watch from the sidelines.
