Pandemic Stock Darlings: Where Are They Now? 😷

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This Pandemic Stock Darling Has Come Back Down to Earth

Jody Chudley, Contributing Analyst, The Oxford Club

Jody Chudley

Teladoc Health (NYSE: TDOC) was a huge winner when the pandemic broke out in early 2020.

This is a business that provides virtual healthcare services that enable patients to consult health providers over the phone or through video chat. You can consult a physician from the safety and comfort of your home.

Honestly, there could hardly have been a better business to be in during a pandemic. Nobody wanted to go to the doctor's office and be surrounded by sick people.

Not surprisingly, the company's stock more than doubled between January 1, 2020, and early April 2020.

I weighed in on Teladoc's stock back then and was not optimistic about its future prospects.

My official conclusion was this: "Looking forward... I don't need a crystal ball to know that now is definitely not the time to be buying shares of... Teladoc."


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My reasoning was straightforward...

First, I believed that the surge in patient demand that Teladoc was then experiencing was not going to be permanent. I had faith that life would get back to something closer to normal and that people would prefer going to see their doctors in person again.

Second, I believed that the valuation of Teladoc's stock was ridiculously high. My view was that far too much optimism was priced into Teladoc's stock.

Subsequently, I've been proven correct.

Since I published that analysis on April 9, 2020, Teladoc's shares have dropped from $150 per share to under $30.

Chart: Teladoc Health's Dramatic Price Change

That was a brutal 80%-plus decline.

Which makes me wonder...

While the market got way too optimistic about Teladoc during the pandemic, perhaps it has now gotten too pessimistic?

We repeatedly see that hot stocks that crash often become good bargains after investors have given up on them. Tech stocks after the internet bubble collapsed is one obvious example. American banks and homebuilders after the 2008 financial crisis is another.

A quick look at Teladoc's price-to-sales valuation certainly shows a dramatic change in how the market values this business.

After trading at a gaudy 32 times sales at one point in 2020, the stock has dropped to trading at just two times sales.

Chart: Teladoc Health's Price-to-Sales Ratio

That is a massive revaluation!

But does that necessarily mean the stock is a bargain?

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