Teladoc Health (TDOC) was the perfect COVID-19 trade… until it wasn’t.
Think about it… The lockdowns meant you couldn’t leave your house to go to the doctor in the pandemic’s early days. Instead, the doctor saw you over the computer.
We’d finally stepped into the future… You would set up a brief video chat with the doctor. Then, they could prescribe medication as you sat in your living room or bedroom.
Heck, two years later, it’s still convenient… I used this service just last month.
But just because it’s a great service doesn’t mean it’s a great stock. And as I’ll explain today, Teladoc’s stock has failed over the past year for one simple reason…
The trade was “too easy” to make.
We’ll discuss how the Power Gauge saw its downfall coming. That’s how I knew to warn a select group of our readers to stay far away, even though it had started to bounce back.
Let me explain…
“Pandemic stocks” like Teladoc were all the craze in 2020. And for the right reasons, too…
COVID-19 changed the world. Folks started working from home. People began getting groceries delivered. They did whatever it took to avoid leaving the house.
And investors piled into the stocks best-positioned to benefit from these changes. As a virtual health care company, Teladoc was an obvious choice in this scenario… It surged roughly 160% over a one-year span from February 2020 through February 2021.
But that didn’t stop investors from running for the exits once “normal” started to return…
You see, many of the hottest COVID-19 stocks blew off steam after vaccines became readily available early last year. Teladoc was no exception… From its high in February 2021 through mid-May, the stock tumbled 55%.
But then, it looked like Teladoc had found its footing. Its share price rallied nearly 30% through the end of June.
Early in this bounce back, I decided to do a “Health Check” on Teladoc using our Power Gauge system. The outlook was terrible… In fact, it was so bad that I made Teladoc my “Bearish Chart of the Day” for a group of our paid subscribers on June 7, 2021.
As part of my analysis on Teladoc last June, I called out the negative technical setup, the pandemic starting to wane, and the continued “reopening” trade. Notice that I warned folks in the middle of the big bounce up. Two main factors played into my bearish outlook…
First, I looked at our proprietary relative strength indicator. It went negative when the stock traded at around $240 per share in February 2021.
Then, our Power Gauge system itself turned “bearish” in mid-March. Teladoc was around $185 per share at that point.
So in June, when it looked like Teladoc was bouncing back, it was easy for me to tell our subscribers to “stay away.”
The Power Gauge did the work ahead of time. And I hope folks listened to the warning… Teladoc is down 52% since I made it my “Bearish Chart of the Day” on June 7.
The thing is… even after such a major drop, the Power Gauge is still “bearish” on the stock today. Take a look at the Power Gauge’s current Health Check on Teladoc…
As you can see, it’s nothing but red. Teladoc’s stock is down 75% over the past year. But even at the currently low level of $72.83 per share, its Health Check score is failing.
This “too easy” pandemic trade wiped out many investors. And on the way down, it flashed what looked like a possible return to glory.
Even today, it still seems like an obvious trade. Like I said, I used the service myself recently.
But the Power Gauge helped us avoid all the carnage. And right now, it’s telling investors to still steer clear of this stock. I recommend you heed that warning.
Good investing,
Pete Carmasino
