Teladoc is on the verge of replacing Tesla as Ark Invest's biggest holding. Here's why Cathie Wood is so bullish on the telemedicine company.
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- Teladoc is neck and neck with Tesla as Ark Invest's top holding across all of its funds.
- Cathie Wood has been consistently trimming Ark Invest's Tesla stake while buying more Teladoc.
- Here's why she is so bullish on the telemedicine company that lost 54% in 2021.
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Despite a more than 50% decline in 2021, Teladoc has quietly risen to be Ark Invest's second largest holding across all of its funds — and it is on the verge of replacing Tesla for the top spot.
As of Friday, its Teladoc position was worth $1.24 billion, while its Tesla position was worth $1.25 billion, according to the latest data from Cathie Wood's Ark. Depending on how Monday shakes out, Teladoc could finally knock Tesla off the top spot in Ark's investment portfolio.
Teladoc was first added to Ark's flagship Disruptive Innovation and Genomic Revolution ETFs in September 2020, with a 2% weight across all of Ark's combined ETF funds. Since then, Ark has consistently added to the position, with Teladoc having a 5.7% weighting today.
While Ark was buying Teladoc, it was also consistently selling Tesla. Ark's purchase of Tesla shares last week after its earnings decline was the first time in eight months the Wood bought the EV stock.
Teladoc is a telemedicine company that saw a boom in business amid the COVID-19 pandemic. The company's platform allows patients to schedule virtual doctor visits.
In late 2020, Teladoc acquired digital healthy company Livongo for $18.5 billion. At its peak in early 2021, the combined company was worth nearly $45 billion. Today, it's worth just $11 billion.
But that decline represents an opportunity for Wood. Here's why she is so bullish on Teladoc, according to a recent interview with ETF Trends.
1. The Pandemic Changed Things
"A lot of people were introduced to telemedicine during the coronavirus crisis. They got their first taste. And to the extent they can help it, meaning they don't absolutely have to see a doctor for checkup reasons that need to be done personally, we are not going back to the old way of doing things."
2. The Cross-Selling Opportunity
"Now, if you look at the revenue of Teladoc, it is up fourfold from 2019. And perhaps more important, the average revenue per user has gone from roughly $1, to $2.60. And our analyst, Simon Barnett, says that if they did a lot more cross-selling and just theoretically, every person took all of their services, that ARPU could go all the way to $68. Now, of course it won't, but it is going a lot higher."
3. They Have A Real Business
"They just guided to the December quarter 43% growth, which was higher than consensus expectations. That revenue for 2021 now stands at $2 billion dollars. That's a real company. A lot of sellers of our stocks... really don't care what a company does. Many just have used valuation as a reason to sell our stocks. But they compare our strategy to a tech and telecom bubble strategy. None of the companies in the tech and telecom bubble that I remember got anywhere near $2 billion in sales."
4. On Competition
"Many people are basically dismissing Teladoc as, hey, United Healthcare could do that easily. Well, the fact is, and maybe they could – they are trying to do it in some way – but this is not their DNA. If you look at Teladoc's price to sales right now, Teladoc's price to sales is 5x. United Health, 13x to 14x. Teladoc's growth rate revenues, they will tell you over the next three to five years, 25% to 30% plus, and United Health, maybe 10%. So there's something very interesting about this picture."
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