We share weekly commentaries with investors on stocks in our strategies that have appreciated or dropped more than 15% in a day during the course of the week. We hope you find this commentary useful.
Teladoc (TDOC)
-40%
Shares of Teladoc, the world’s largest global digital health platform, fell roughly 40% on Thursday after its quarterly earnings report. For perspective, Teladoc previously traded at these levels when it was cashflow negative in 2017. Compared to 2017, its visit volumes are 5x higher, its paid member count is twice as high, annual revenue is 5x higher, it is cashflow positive, and 1 in 6 Americans is a full Teladoc member. The primary reason for Teladoc's sudden stock decline seems to have been its 25% reduction in 2022 AEBITDA* guidance, the result primarily of higher customer acquisition costs in one of its Direct-To-Consumer (DTC) mental health channels. Since COVID-19 began, Teladoc has increased AEBITDA by more than 650% and doubled its AEBITDA margin, boosting its cash position to ~$900 million.Our five-year thesis for Teladoc is built around the company's transition from a general telehealth provider to a B2B enterprise solution for whole-person healthcare. To measure the company's progress, we track utilization––which has increased 160% since 2019––multi-service adoption––which has increased from 67% to 78% over the past year––and competitive wins. One recent example is its new contract with Northwell, New York's largest health system, which Teladoc won from a competitor based on its multi-faceted platform.That said, given the tumultuous market dynamics in digital care, management would have served shareholders and other stakeholders better with a strategy of under-promising and over-delivering. Nonetheless, we do believe that Teladoc’s long-term competitive position and product differentiation are unmatched, gearing it for superior growth over the long term.*AEBITDA = Adjusting for non-cash, stock-based compensation, which has booked almost entirely from the Livongo transaction.
Shares of Zymergen traded up 15% on Monday, then corrected 16% during the rest of the week on little news. Zymergen, a product-oriented synthetic biology company focused on enzymatic and metagenomic engineering, has detailed a strategy to rebuild its business in the next few years.
Shares of Archer Aviation traded up 25% on Thursday after the company announced a joint eVTOL advisory committee with United Airlines, and then JP Morgan initiated coverage with an overweight rating. Archer Aviation is an aerospace company aiming to revolutionize mobility with its electric vehicle takeoff and landing (eVTOL) products and services.
Shares of Accolade traded down nearly 50% on Friday after the company’s earnings call. Management announced a 5% reduction in full-year revenue guidance, unchanged intermediate-term EBITDA guidance, and the loss of a marquee client, Comcast (CMCSA). Competitive noise from VC-backed entrants appears to be causing an extension in sales cycles in the self-insured employer market––a dynamic also impacting Teladoc (TDOC). In our view, these issues will be transient in the context of our five-year investment time horizon, especially because subscale competitors tend to operate with negative unit economics when VC funding dries up. While the loss of Comcast stings optically, we understand management’s decision to sacrifice lower-margin revenue and extend its liquidity position. Accolade is a pioneer in hyper-personalized healthcare benefit management for self-insured employers.
