Cathie Wood Has Been Steadily Selling Shares of This Growth Stock. Should You?

Cathie Wood Has Been Steadily Selling Shares of This Growth Stock. Should You?

Superstar investor Cathie Wood is known for scooping up promising stocks when they’re down — the Ark Invest founder and CEO isn’t shy about going against the grain. It focuses on innovative companies with promising long-term prospects, and these types of stocks make up its funds. Wood does not rely on overnight production, but rather on sustainable growth over several years.

This leading investor is betting on various big names such as You’re hereits main holding, as well as smaller companies like gene editing specialist CRISPR therapeutics – and its stock selection covers a variety of sectors, as long as innovation is involved. Investors often monitor Wood and sometimes follow his investment moves, hoping to benefit from his expertise.

Well, in recent weeks, one of Wood’s recurring actions has been selling shares of one of his longtime favorite stocks, Teladoc Health (NYSE:TDOC). Wood’s flagship product Arche Innovation funds and Genomic revolution The fund still includes the telemedicine giant with weightings of 1.3% and 2.35%, respectively, so she hasn’t abandoned the company – but she has gradually reduced her positions. Should you follow his example?

Cathie Wood Has Been Steadily Selling Shares of This Growth Stock. Should You?

Image source: Getty Images.

Early days of Teladoc’s booming pandemic

First, some background on this telemedicine thing. Teladoc Health’s revenue and visits soared by triple digits during the early days of the pandemic as people opted for virtual doctor visits rather than traditional appointments. But when growth slowed to double-digit gains and Teladoc’s acquisition of chronic care specialist Livongo generated billions of dollars in non-cash goodwill. depreciation chargesinvestors grew worried – and the stock price gradually fell.

The concern was – and still is – that Teladoc is struggling to turn its revenue growth into profitability. In recent times, the company has made considerable efforts to turn the situation around, and these efforts have yielded results. Teladoc cut costs early last year to align spending with growth opportunities and also committed to balancing its quest for revenue growth with its quest for profitability.

Teladoc has made progress in the adjustment EBITDA, for example, in the most recent quarter it climbed 20% to over $63 million. The company’s net loss widened, but that loss included about $17 million in restructuring costs – something to be expected from a company in the midst of a turnaround.

Chronic care stimulates growth

And Teladoc continued to demonstrate that its chronic care business drives growth. Chronic care enrollment increased 9% year-over-year, and there is reason to be optimistic about this area in the long term. That’s because about half of Americans have at least one chronic illness, so it’s an area of ​​great need.

However, some negative points are currently emerging and are probably weighing on the share price. First, longtime CEO Jason Gorevic resigned in April and CFO Mala Murthy stepped in while the company searched for a permanent replacement.

This lack of a permanent leader represents uncertainty for the company and Teladoc may have difficulty convincing investors until it has finalized its research. In the recent earnings report, Murthy said the company plans to appoint a permanent CEO later this year.

Second, the promising field of mental health disappointed investors, with the BetterHelp segment generating declining revenue in the first quarter. And the company expects flat single-digit growth for the business this year. BetterHelp’s revenue soared more than 20% in the first quarter of last year, so the setback, even temporary, is clearly enough to weigh on investor confidence and stock performance.

A leader in telemedicine

In the meantime, it’s important to remember that Teladoc is a leader in its industry, has nearly 92 million members, and holds over $1 billion in cash on its balance sheet. The company therefore has key elements that could help it excel in the long term. And today it is trading at its lowest level relative to sales.

TDOC PS Ratio ChartTDOC PS Ratio Chart

TDOC PS Ratio Chart

TDOC PS ratio data by Y Charts

So should you buy, sell or hold Teladoc? Unless you are an aggressive investor, it is best not to buy this stock at this time and instead wait to see who will be named CEO and gain insight into that person’s strategy for the company.

But what if you already own shares? In this case, you may want to reduce your position if you need cash for another investment, for example. This may be part of the reason Cathie Wood has been selling shares lately. Otherwise, it is better to hold your position if selling now results in a loss. Teladoc is in a state of uncertainty today, but the company has taken steps on the path to recovery and could gain over time. So it’s worth staying put during these transition periods.

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Adria Cimino holds positions at Tesla. The Motley Fool ranks and recommends CRISPR Therapeutics, Teladoc Health and Tesla. The Mad Motley has a disclosure policy.

Cathie Wood regularly sells shares of this growth stock. Should you? was originally published by The Motley Fool

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