Q4 earnings press release proved a plunge from the 20th floor. Ugly. It instantly produced a 20% hit to the share price. Fugly. Simply stand back. No one catches that knife. Or do they? We did. It’s a trick sort of.
The SEC mandates that companies report, but it doesn’t tell them what to say. You have to be there for that. The Teladive began with a humble press release–they always does. STOCKjAW not only survived, but thrived the Teladive. What did we do?
Here’s a hint. Be there when your company reports, while the market’s yet open. The edges are where many of the moves you’re looking for happen.
is a phenom with over 22 million receiving the call. “We have passed the point of inevitability” CEO Jason Gorevic claims–and that’s true. Each passing quarter the company has better fundamentals, and dominant global positioning. The numbers demonstrate TDOC’s global leadership in what’s known as “virtual care.” The fundamentals of this company have for several years only improved, becoming the envy of any burgeoning enterprise. That is until last Wednesday.
Few enterprises are fortunate enough to be the player leading a revolution. All of FAANG were, and Align Technology was too. All of the former radically transformed their respective industries. All of the afore mentioned utilized the wider digital wave to create the new.
But those who fly so high as to change the course of development, also create a long distance to sink. For Teladoc Q4 may mark the top of their climb, as a momentum darling. Maybe not. Either way, how can a year-over-year EPS beat of 62.33% rank as a end? Keep in mind that Teladoc, like many compaines, is yet debt funded. Q4’s EPS came in at -$0.35 loss, against a year-ago -$0.76 loss. That’s better right?
TDOC posted a quarterly top and bottom line above consensus, barely above. Q4 revenue grew 59%, and 2018 full year revenue grew 79%. Slice it up any way you like and it’s still a beat-down. Yet the report twisted a tornado of derision.
a shareholder, conference calls are your quarterly opportunity to be right inside the huddle. Do so. Management presents the business as it is currently. The CEO and CFO explain results against market conditions and their own development. Analysts then fire questions, hand out “congrats.” Listen for tone. The tone of analysts is as important as the answers provided.
Equity investing is about being in proper position when your stock moves. Often your stock moves the most in the “after hours” session, when most investors aren’t paying attention. The after-hours trading session runs for only ninety minutes. During that short window the same stock can often move radically in both directions. Those moves are opportunities. Limit orders are the way to play, but setting those doesn’t tell you why things are moving.
Be there when your stock moves. Most companies report earnings “after close.” That often triggers big moves in that ninety minute window known as the “after-hours.” Or you can simply read about it in the morning while mopping up.
Last Wednesday, February 27th, TDOC reported Q4 results. First came the details. Always find those in your company’s press release, launched just after close on report day. Teladoc’s February 27th Q4 press release immediately sent shares into a steep dive in the after-hours session. 20% later TDOC bounced. Sickened investors looked on. Shares recovered 5.5% before stalling for the day. TDOC ended Wednesday 14.5% down. Fugly.
are in general a twitchy crowd. Missing most of the biggest sudden opportunities is completely unnecessary. Many investors and traders will say it’s unwise to sell into the teeth of a downturn. Yet jittery markets create many downturns that seem to promise devastation. Who wants to ride one of those?
Other’s disagree–including us. This year we’ve seen many crushing drops. Thus we’ve learned that lesson. We also witnessed ETSY’s February 4th 10.5% spike completely vanish almost instantly, as we sat paralyzed.
STOCKjAW missed TDOC’s sickening heavy volume fall to the street. That’s precisely why we’re talking about it. We own TDOC and were clearly provided with the opportunity to dodge that fall. We didn’t. We woke to the ugliness on Thursday. Our 6.5% gain in TDOC had melted into a hellish double-digit cascade of revulsion.
On the following day we tuned into the trading action ten minutes into pre-market, as the stock sat 14.5% down from Wednesdays after-hours session. The foul paralysis we’d suffered during ETSY’s missed spike was now a lesson learned. We jolted into action. We began investigating, very quickly.
We seized and instantly ingested the press release, now very old at 16 hours. TDOC had reported in-line on both the top and bottom lines. Good. Yet analysts and investors alike had beaten shares bloodly. How does a company’s shares lose 20% over-night while posting an annual revenue growth of 79%?
we reduce our cost basis by buying more, at a great discount? Pre-market action continued as we searched. Shares slowly began to recover. The fall had all the signs of an over-reaction–a buying opportunity. Teladoc was being punished beyond any sin we could see, thus we chose to increased our position by 40%.
Teladoc’s ugly sin quickly became clear. The company had drastically guided down from their phenomenal FY2018 revenue growth rate of 79%, to a maximum FY19 estimate of 30%. Both analysts and investors will wail and rend their clothing when any “momentum” play guides once stellar growth into the ground. Full year growth of 30% would be reason to celebrate, normally. But not when it’s a 50% chainsaw job.
By the open on Friday April 1st, our position in Teladoc was flat, and 40% larger. We firmly believed the share price drop would coax in buyers. And it did. How many actually knew the back story?
When your company beats on both the top and bottom lines, always look to the guidance. All three lead each and every earnings report. TDOC has guided down to a maximum 30% FY2019 revenue growth rate. Yet, is this the end?
Over-reactions to earnings are more the norm than not. Big moves in extended hours offer an opportunity to buy, sell, or adjust. When doing so use “limit” orders. Prior to TDOC’s Q4 press release on Wednesday STOCKjAW sat on a 6.5% gain. At open on Thursday we sat at a net 14.5% loss. We increased our position by 40%. By Friday’s close, yesterday, we sat at a 7.04% gain, on a 40% larger position.
The judgement on Teladoc’s future has just begun, and will require some time to shake out. Early signs are in. On Friday a pair of firms weighed in. Conaccord maintained it’s “Buy” rating, and upped it’s price target by $1 to $95, stating TDOC will “outperform” it’s own guidance:”
“Guidance for 2019 is likely a replay of 2018 with initial guidance reining in estimates only to provide upside as the year progresses. All metrics appear to be pointing to sustained growth, exemplified by annual utilization rates jumping 250 basis points.”
Oppenheimer cut its price target by $3 to $84, while maintaining it’s “Outperform” rating:
“The prolonged wait around potential UNH book of business is likely to cause uncertainty and be exhausting to investors, but that could just be the complexity of working with UNH and its massive potential.”
Our current thinking on Teladoc continues to develop. Investor sentiment will display itself to some degree during the coming week. We will be watching closely. Expanding our position prior to the price plunge would have erased our gain. Doing so during the chaos of the quarterly report left us ahead. Awareness of both Teledoc itself, and the reporting system made that possible. Luck always helps.
Paying close attention during extended hours can prove pivotal. For us, it’s now central to our process. Good trading.