Market Movers: Teladoc Falls Off a Cliff as It Posts a $3 Billion Loss
Happy Saturday folks,
This week was an eventful one for investors. The much-anticipated meeting of the Federal Reserve ended with an expected 0.75% hike in interest rates. However, investors were spooked after retail giant Walmart lowered its earnings forecast for the rest of 2022. The discount retailer claimed inflation had reduced consumer spending on high-margin items such as electronics and clothing.
Additionally, shares of social media giant Meta Platforms traded lower after the company reported a quarterly decline in revenue for the first time ever. Meta’s sales were down 1%, while adjusted earnings fell by 32% year-over-year in the June quarter.
The week ended on a positive note as tech heavyweights Apple and Amazon beat earnings and revenue estimates in Q2, driving share prices higher.
In the last five trading sessions, the S&P 500 index was up 1.83%, while the tech-heavy Nasdaq Composite index rose by 1.14%.
Now, let’s look at some of this week’s biggest winners and losers, shall we?
Here were the biggest movers in the MyWallSt shortlist this week:
Moving Up ⬆️
Chipotle Mexican Grill (CMG) +14.2%
Arista Networks (ANET) +12.6%
Bumble (BMBL) +11.0%
Ford Motor Company (F) +9.2%
Autodesk (ADSK) +8.3%
Moving Down ⬇️
Teladoc (TDOC) -13.6%
Lovesac (LOVE) -9.0%
Eventbrite (EB) -7.3%
Upstart Holdings (UPST) -6.4%
Cloudflare (NET) -5.8%
The Winners ⬆️
Chipotle Mexican Grill
Shares of Chipotle Mexican Grill (CMG) rose 14.2% this week after the fast-food chain reported its Q2 results on July 26. In Q2, its revenue increased 17% year-over-year to $2.2 billion, primarily due to a 10% growth in comparable-store sales and new store openings.
The company stated that inflation is driving raw material prices higher. Still, Chipotle has managed to raise prices and pass on the costs to customers, allowing it to report earnings of $9.30 per share, compared to estimates of $9.04 per share.
Despite an inflationary environment, Chipotle’s operating margin widened to 15.3% in Q2, compared to 13% in the year-ago period. Further, its net income surged 38% to $260 million in the second quarter of 2022.
The company’s strong brand positioning ensures Chipotle enjoys pricing power. In fact, Chipotle maintained it would again raise prices in August by 5% to 9%.
Another key metric for investors is Chipotle’s digital sales, which accounted for close to 40% of total food and beverage sales in the quarter. It ended Q2 with 29 million digital rewards members, which is quite enviable. Digital sales contribute positively toward profit margins and operational efficiency and will be a crucial driver for Chipotle in the future.
Ford Motor Company
Automobile manufacturer Ford (F) announced its Q2 results earlier this week and reported revenue of $40 billion, an increase of 50% year-over-year. Its net income rose by 19% to $0.68 per share, compared to estimates of $0.45 per share.
This is despite the supply chain disruptions that have impacted the auto industry since the start of COVID-19. There has been a shortage of semiconductor chips and several other components. While production challenges are improving, demand continues to outstrip supply, allowing Ford to charge higher prices for its automobiles.
A favorable pricing environment has driven adjusted EBIT (earnings before interest and taxes) in Q2 to $3.7 billion, an increase of 236% year-over-year. Ford’s EBIT margin has also improved from 3.9% in Q2 of 2021 to 9.3% in the June quarter.
Ford expects to end the year with adjusted EBIT between $11.5 billion and $12.5 billion, representing year-over-year growth of 20% at the midpoint guidance. It expects free cash flow between $5.5 billion and $6.5 billion in 2022.
Ford is fast gaining traction in the electric vehicle segment. It expects to manufacture 600,000 EVs each year by the end of 2023. Comparatively, EV leader Tesla is on track to end 2022 with an annual production of 1.4 million vehicles.
Ford’s robust cash flows and a cash balance of $29 billion provide the company with enough financial flexibility to expand its presence in the EV market.
The Losers ⬇️
Shares of health-tech firm Teladoc (TDOC) plunged 13.2% this week after it fell by 17.7% in a single trading session on Thursday. Teladoc posted a worse-than-expected net loss in Q2, dragging the stock lower by a wide margin.
In the June quarter, Teladoc reported revenue of $592.38 million and an adjusted loss of $19.22 per share. Analysts forecast sales of $583.76 million and an adjusted loss of just $0.64 per share.
While Teladoc beat analyst revenue estimates, it missed the earnings forecast significantly. The company attributed its loss per share to a non-cash goodwill impairment charge of $18.78 per share and stock-based compensation of $0.32 per share.
A goodwill impairment charge is reported when a company overpays for an acquisition. In this case, Teladoc acquired Livongo for a staggering $18.5 billion in 2020 and has since written down close to $10 billion in goodwill impairment charges. In fact, Teladoc’s current market cap is below $7 billion.
For Q3, Teladoc estimates revenue between $600 million and $620 million with an adjusted loss between $0.85 and $0.60 per share. Analysts estimated Teladoc to report revenue of $613.73 million with an adjusted loss of $0.55 per share. The earnings miss and higher-than-expected losses for Q3 have sent Teladoc stock spiraling downwards.
Teladoc stock is currently trading 88% below all-time highs.