Today, shares of Teladoc (NYSE:TDOC) are plunging by over 40% after the company reported abysmal first-quarter earnings. During Q1, Teladoc reported a loss of $41.58 per share, which was affected by a $6.6 billion goodwill impairment charge. A year ago, the telemedicine company reported a loss of $1.31 per share for the same period.
Teladoc’s management did not discuss specific details surrounding the goodwill impairment charge. However, the company did say the charge was due to “decreased market multiples” and an “increased discount rate.”
This charge likely relates to the acquisition of Livongo, which Teladoc acquired for $18.5 billion in 2020. According to filings with the U.S. Securities and Exchange Commission (SEC), Teladoc had $14.5 billion of goodwill, $12.8 billion of which was attributable to Livongo.
Cathie Wood Buys TDOC Stock
Unfortunately for Cathie Wood, Ark Invest is heavily invested into Teladoc. The exchange-traded fund (ETF) manager reported purchasing the company twice this week, on both Monday and Tuesday. On Monday, Ark ETFs reported purchasing 44,940 shares. The next day, Ark ETFs purchased 101,563 shares. Ark ETFs did not purchase any shares yesterday before earnings, however. Furthermore, the transactions on Monday represented Ark’s first purchase of Teladoc since Feb. 8.
After the recent purchases, Ark ETFs in aggregate own 17.78 million shares, which were worth $1.1 billion as of yesterday’s close. As of today, the dollar basis of that position has been practically cut in half.
On top of this, Ark Invest is also the largest shareholder of TDOC stock. Teladoc is the second largest holding across all Ark ETFs, with a 5.77% allocation. This trails behind only Tesla (NASDAQ:TSLA), which has a 6.7% allocation.
Analysts Downgrade Teladoc After Earnings
Cathie Wood’s acquisition of Teladoc reflects that she is bullish on the telemedicine industry. However, competition in the space is steep. As Citi analyst Daniel Grosslight says, the industry’s “competitive intensity has increased significantly” and is “unlikely to abate any time soon.”
After reviewing earnings, Grosslight drastically reduced his TDOC stock price target from $115 to $43 per share. The analyst also believes the company is now at an attractive price for a buyout. This is because the stock’s forward-looking sales multiple is currently trading at an “all-time low.”
Grosslight isn’t the only analyst to downgrade the company in light of earnings. Bloomberg reports that at least six analysts have downgraded TDOC now. These analysts come from firms like JPMorgan and Deutsche Bank.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
