After the popular meme stocks AMC and GameStop tumbled in price this month, the meme stock mania appears to be ebbing. The buzz has worn off for the meme stocks for now but is expected to resume at the beginning of 2022.
While the development of therapies, increasing demand from an aging population, and a growing trend in preventive healthcare should propel the healthcare sector’s growth in the post-pandemic environment, the sector is expected to face new challenges next year. The healthcare labor shortage, cyberattacks, and the need for stronger management to tackle risks are among the challenges the healthcare sector is expected to face in 2022.
Given this backdrop, we think it is better to avoid meme stocks in the healthcare sector Teladoc Health, Inc. (TDOC), Clover Health Investments, Corp. (CLOV), and Sundial Growers Inc. (SNDL). None is not well-positioned to capitalize on the industry tailwinds.
Teladoc Health, Inc. (TDOC)
Incorporated in 2002, TDOC in Dallas, Tex., is a virtual healthcare service provider that operates in the United States and internationally. The company offers telehealth solutions, chronic condition management, expert medical services, and behavioral health solutions. TDOC’s consumer brands include: Teladoc, Livongo, Advance Medical, Best Doctors, BetterHelp, and HealthiestYou that provide access to advice and resolution for an array of healthcare needs.
TDOC’s revenue increased 80.6% year-over-year to $521.66 million in the third quarter, ended September 30, 2021. However, the company’s total expenses grew 88.7% from their year-ago value to $582.23 million. Its loss from operations rose 207.1% from the prior-year quarter to $60.58 million. Also, the company’s net loss increased 135% year-over-year to $84.34 million.
TDOC has failed to beat the consensus EPS estimates in three of the trailing four quarters. Its EPS is expected to decrease 35.5% per annum over the next five years. The stock has declined 50.3% in price over the past year and 51.1% year-to-date.
TDOC’s POWR Ratings are consistent with this bleak outlook. The stock has an overall F rating, which equates to a Strong Sell in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
Also, the stock has an F grade for Sentiment and a D grade for Value and Stability. We have also graded TDOC for Growth, Momentum, and Quality. Click here to access all TDOC’s ratings. TDOC is ranked #86 of the 88 stocks in the D-rated Medical – Services industry.
Clover Health Investments, Corp. (CLOV)
CLOV provides Medicare Advantage and healthcare plans to America’s seniors. The Franklin, Tenn.-based company offers a software platform that uses data and technology, the Clover Assistant, which aggregates patient data from across the health ecosystem and provides primary care physicians (PCPs). In addition, it provides America’s seniors with both a Preferred Provider Organization (PPO) and a Health Maintenance Organization (HMO) plan.
During the third quarter, ended September 30, 2021, CLOV’s total revenues increased 152.7% year-over-year to $427.16 million. However, the company’s total operating expenses grew 202.3% from its year-ago value to $576.42 million. Its loss from operations rose 590.4% from the prior-year quarter to $149.25 million. Also, the company’s net loss came in at $34.53 million, compared to $12.76 million in net income in the third quarter of 2020.
CLOV has failed to beat the consensus EPS estimates in three of the trailing four quarters. Its EPS is estimated to decrease 46.2% next quarter. The stock has declined 75% in price year-to-date.
CLOV’s poor prospects are also apparent in its POWR Ratings. The stock has an overall F rating, which equates to a Strong Sell in our proprietary rating system. Also, the stock has an F grade for Stability and a D grade for Growth and Quality.
In addition to the POWR Rating grades I have just highlighted, one can see CLOV’s ratings for Sentiment, Value, and Momentum here. CLOV is ranked last of 12 stocks in the B-rated Medical – Health Insurance industry.
Sundial Growers Inc. (SNDL)
SNDL is a Calgary, Canada-based cannabis producer. The company produces and distributes adult-use cannabis products, including inhalable products, flowers, pre-rolls, and vapes. Also, SNDL, through its joint venture SunStream Bancorp Inc., offers growth capital and a strategic support platform in the global cannabis sector. The company markets its products under the Top Leaf, Sundial Cannabis, Palmetto, and Grasslands brands.
For the third quarter, ended September 30, 2021, SNDL’s gross revenue decreased 29% year-over-year to CAD11.02 million ($8.57 million). The company’s revenue from dried flowers declined 20.3% from its year-ago value to CAD9.27 million ($7.19 million). Also, its revenue from the vapes segment reduced 67.4% from the prior-year quarter to CAD1.17 million ($904,260).
Analysts expect SNDL’s revenue to decline 3.1% year-over-year to $48.93 million in its fiscal year 2021. Its EPS is expected to remain negative in the current year and next year. The stock has declined 60.8% in price over the past nine months.
It is no surprise that SNDL has an overall F rating, which equates to a Strong Sell in our POWR Rating system. Also, the stock has an F grade for Value and Stability.
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TDOC shares were trading at $95.17 per share on Monday afternoon, down $2.60 (-2.66%). Year-to-date, TDOC has declined -52.41%, versus a 22.04% rise in the benchmark S&P 500 index during the same period.
About the Author: Priyanka Mandal
Priyanka is a passionate investment analyst and financial journalist. After earning a master's degree in economics, her interest in financial markets motivated her to begin her career in investment research. More...
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