'Teladoc will become a premier enterprise partner': Why Cathie Wood is buying the dip and remaining bullish on Teladoc

Virtual healthcare provider Teladoc Health TDOC was the preferred stock pick of Ark Invest CEO Cathie Wood. After shares fell 18% on Thursday from second-quarter financial results, Wood defended the pick and bought the drop.

What happened: Teladoc Health shares fell Thursday after second-quarter results. The company posted second-quarter revenue of $592.4 million, up 18% year-on-year and above Street estimates.

Investors were unimpressed with the company's guidance and drove shares lower after the report. The company said it expects revenue to be in the lower end of the revenue guidance of $2.4 billion to $2.5 billion for the fiscal year.

“While we continue to see growing uncertainty in the macro backdrop, we remain confident in our ability to execute on our strategy,” said Jason Gorevic, CEO of Teladoc.

Related link: Why Teladoc's health stock is collapsing today

Wood Defends and Buys More: A weekend email is sent that provides feedback on positions in Ark Invest ETFs that have double-digit moves during the week . Teladoc was one of the stocks covered in the report, with Wood saying investors may be undervaluing the company.

"We believe other investors are concerned that Teladoc may not be able to meet the strong increase in EBITDA it expects for the fourth quarter," Wood said. "We estimate that Teladoc will need to generate 43% of its annual EGBITDA target from lower advertising during the holiday quarter."

Wood points out that Teladoc achieved 48% of its annual EBITDA in the fourth quarter of 2019.

"We note that most key operational metrics in the quarter confirmed our long-term thesis that Teladoc will become a premier enterprise partner for delivering hybrid care in the United States. United and maybe elsewhere."

Wood notes Teladoc's second quarter chronic care membership additions and enrollment numbers were ahead of analysts' expectations.

"Today, 30% of people enrolled in chronic care use multiple Teladoc products."

Four of Ark Invest ETFs added to their positions in Teladoc on Thursday, with more than 400,000 shares bought on the earnings drop.

As of Friday, here is how Teladoc is represented in the four Ark Invest ETFs:

Ark Innovation ETF ARKK: 9th largest position, $425.2 million, 4.44% of assets Ark Next Generation Internet ETF ARKW: 10th largest position, $64.5 million, 4.36% of assets Ark Genomic Revolution ETF ARKG: 5th largest position, $135.3 million, 4.77% of assets Ark Fintech Innovation ETF ARKF: 12th largest position, $31.6 million, 3.33% of assets

Together, the four ETFs hold over $656 million in Teladoc stock.

"While consumer sentiment, discretionary spending and paid search returns have impacted Teladoc's EBITDA margin, we believe these forces are transitory, certainly in the context of ARK's five-year investment horizon."< /p>

TDOC Price Action: Teladoc stock closed at $36.83 on Friday, down from a 52-week range of $27.38 to $156.82. Teladoc shares are down 76% in the past year and 61% year-to-date in 2022.

Photo: courtesy of teladochealth.com

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