What's up guys and welcome back to wall street millennial on this channel, we cover everything related to stocks and investing kathy. Wood is perhaps the single most polarizing figure in the stock market. Today, throughout 2020 and 2021 she's achieved something close to god-like status among many retail investors. She built her reputation on an incredibly successful investment in tesla and may believe that she'll be the one to identify the trillion dollar companies of the next decade.

But with the prospect of great returns comes the reality of great risk. Her flagship rqtf has given up more than all of its pandemic gains and has significantly underperformed the s. P. 500.

Since the end of 2019.. Much of this disastrous performance has come from wood, doubling and tripling down on speculative money losing companies, even as their stock prices are falling 60, 70 and, in some cases more than 80 percent. The most extreme example of this has been the telemedicine company teledoc since its peak in february of last year. Its share price has fallen by a gut-wrenching 88 percent, making it a near-total loss for investors as the price declined.

Wood continued buying shares in almost all free etfs, including her flagship innovation, egf, her next generation internet etf, your genomics, etf and even her fintech etf. Despite the fact that teledoc is not a fintech company, ark is now the single largest shareholder in teludog, owning 12.5 percent of the total shares outstanding. Last week, the company reported first quarter, earnings results which were a complete disaster, and the stock price was cut in half in a single day, despite having already lost hundreds of millions of dollars for investors on this stock alone, kathy wood is completely unpaid. She still thinks that teledoc will be a 10 bagger and even has the potential to have amazon like returns in this video, we'll look at what teledoc does why it's share price is down 90 from its highs and weather has any chance of being the amazon of Healthcare like kathy wood, thinks teledoc was founded all the way back in 2002 by two doctors in dallas.

Here's the idea. Let's say you have a sore throat, a pink eye or some other type of minor ailment. You could drive all the way to the hospital wait in the reception room for two or three hours and eventually see a doctor who will give you a prescription for some type of medicine before tel doc. That was the only option.

A better solution is to call up the doctor on the phone. You could explain your symptoms to him or her. If the problem is obvious enough, the doctor could diagnose it and give a prescription over the phone teledoc put together a network of hundreds of doctors with various specialties. If you feel sick, you could call them and they will be immediately able to connect you with one of their doctors.

The doctors are registered in your state, so they have the authority to write prescriptions, which you can pick up at your local pharmacy. The doctors who work on teledocs network are not employees of the company they're. Instead independent contractors who get paid per consultation, the pay usually ranges from 20 to 50 dollars per hour, while that isn't a whole lot of money. For a doctor, it's a great source of additional income.

For example. Let's say you work at a rural hospital and on some days nobody comes into the hospital as a doctor, you're just sitting at your desk all day, wasting time you can pull out your computer and do a tell doc consultation for 15 minutes and get paid 30 Dollars it's a pretty good gig. In fact, teledoc is often referred to as uber for doctors, because the platform functions in a very similar way in the u.s. Healthcare is usually provided by employers, and this is a major expense for them.

Teledoc strategy is to target large corporations. They'll pay a fixed monthly fee per employee to gain access to teledoc's network once they're on the network. An employee can call tel doc doctor at any time for a flat fee of around 50. In the early years, they had a lot of success.

Signing on massive employers in the state of texas, such as atm t, employee health insurance is a big expense for them, and they're always looking for ways to save money, while they do have to pay fees to teledoc it's much cheaper than going to the hospital in Person any way to minimize the number of hospital visits will save a lot of money. In fact, the consulting firm willis towers-watson estimated large employers in the us alone could save six billion dollars annually by utilizing telemedicine services like teledoc. A quick word from today's sponsor private internet access or pia, which is my vpn of choice. When you use pia, your traffic is securely routed to one of their servers around the world.

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By far, they also developed a video conferencing solution kind of similar to zoom. This makes it easier for patients to show their symptoms to doctors instead of having to describe everything verbally on the phone, while teldox business was already growing rapidly. The pandemic was a huge boon in early 2020 non-life-threatening doctor visits were postponed, so the only way to talk to a doctor was with telemedicine providers like teledoc. Also, there was a general fear around going to the hospital for fears of catching kovid as soon as a pandemic hit.

Their revenue started, exploding exponentially and today is almost tripled. As a major coveted beneficiary wall street fell in love and the stock price increased three and a half full to almost 300 per share. In the summer of 2021, they took advantage of their high share price to acquire another. Digital healthcare company called livongo, an 18.5 billion mega deal funded mostly with stock, that was the largest digital health care deal in history.

By far lefongo is a software company targeting diabetes patients. You can put your blood sample into a lavongo machine to test your blood sugar. The blood sugar level is uploaded to your online profile, so you can monitor its trends over time. Their platform connects you to medical professionals who can advise you about lifestyle changes and improve your diabetes situation.

Both companies, revenue, growth and share prices benefit tremendously from the pandemic. This is because both help people fulfill their health care needs without having to physically go to the hospital. After the lavongo acquisition, teledoc became an integrated telemedicine provider. They can integrate the levongo data with their tel doc platform if you're a diabetes patient using levongo.

You show your lavongo blood sugar data to the tel doc doctor, which helps them to better understand your medical situation. It's not unreasonable that kathy wood saw this as the amazon of healthcare with their software and video medicine solution. They were disrupting the four trillion dollar us healthcare industry and expanding internationally. Their total addressable market could be unimaginably large.

Okay, everything we've talked about so far sounds great, but then why is the stock down almost 90 percent, wiping out close to 50 billion dollars of shareholder value? In fact, teledoc's current market cap of 6 billion dollars is just one-third of the 18 billion dollars that they paid for levongo just a couple years ago. That's a pretty insane number. The combined entity of teledoc and levongo is now worth just one-third of what levongo was purchased for as a standalone company. So what happened? While their revenue growth has been impressive, they have yet to report a single quarter of net profitability, since they went public back in 2015..

Also, their shares outstanding has increased exponentially as they issue more equity to fund their cash burden in numerous acquisitions. This might seem odd. All teledoc has to do is operate the platform, the fees that they charge. Patients and employers is much higher than what they paid to doctors, so they earn very impressive gross margins of almost 70 percent.

The problem is that it's a very competitive industry with low barriers to entry, while teldock is the biggest operator. By far there are many small and regional telemedicine providers that they must compete with to land customers. They spend exorbitantly on sales and marketing which prevents them from achieving net profitability. This is the same reason why ride sharing and food delivery companies are mostly cash burning machines.

There are very little direct costs associated with operating the platform, so you might think they would be profitable, but there's so much competition that they are forced to give very generous promotions both to customers and drivers during the fed induced growth stock bubble of the covet area. Investors were willing to overlook lack of profitability if revenue growth was high. Now that the fed is raising rates, investors want profits now and they have very little patience for high growth cash incinerators. On april 28th, teledoc released an earnings report which briefly caused a stock to lose almost half of its value, falling to a low of 29 per share at face value.

The earnings looked like a complete disaster. They reported earnings per share of negative 41.58 cents. Their losses from the first quarter alone were greater than their entire market cap. That's pretty shocking and you might be inclined to think that losing more than your market cap should drive the company to bankruptcy.

But it's not as bad as it looks. The vast majority of this loss was caused by a non-cash goodwill impairment related to their acquisition of levongo two years prior, remember that they purchased levongo for 18.5 billion dollars based on the technicalities of merger accounting. Most of this purchase price was recognized on teldox balance sheet as goodwill, which is an intangible asset. It's basically saying that since levongo is now part of teledoc, the value of teledoc should incorporate the value of levongo, which is ostensibly 18.5 billion dollars.

Clearly, now that teldox market cap is only six billion dollars, it would be absurd to say that levongo is still worth 18 billion dollars. That's why they had to write it down. The goodwill write down, isn't really that big of a deal. What was a lot more? Concerning was their disappointing revenue and profit guidance for 2022.

They say that they expect 2.45 billion dollars of revenue, which represents a 20 increase over 2021, while not horrible. This is much lower than the 86 growth that they recorded in 2021. They also expect to make slightly negative ebitda, which is earnings before interest taxes, depreciation and amortization. This means the core business will still not be profitable.

Even when you strip out the non-cash impairment charge, ceo jason gorvich blamed the weak guidance on increasingly fierce competition. Their google search ads are bearing less customer conversions as they compete with smaller regional competitors, especially in the direct to consumer space. Direct to consumer means an individual signs up for tel doc directly, not through their employer. However, on the enterprise side, they are still doing pretty.

Well, they recently won a large contract with northwell health, which is the largest hospital system in new york. Teledoc's large scale makes them more attractive to large employers in hospitals, making them a near monopoly, but on the consumer side they don't have much of a competitive advantage. The low barriers to entry means that net profit margins will be driven below zero by intense competition, but if they can starve out their competition, they'll be extremely profitable. Tel doc already has over two billion dollars in annual revenue if they can't even turn a profit.

Yet it's a pretty safe bet that their competitors are losing money as well. These small competitors have their losses funded by venture capital investors who were happy to throw money at them when interest rates were zero. Now that money is no longer free, the venture capitalist will be far stingier and a lot of these small firms could go bankrupt as a publicly traded company. Teledoc has a huge advantage, it's much easier for them to pay their employees with stock-based compensation.

While that is dilutive to the equity value, it reduces their cash burn and should help them stay afloat until they reach profitability, seeing as they already make 70 gross margins, they should be able to achieve profitability at some point down the road. The decline of teledoc's share price can be partially attributed to the fed raising rates, but in the long run, this may benefit them by driving their smaller competitors out of business and leaving tel doc. As a last man, standing will teldock be the next amazon like kathy wood, says, probably not, but with the share price down almost 90 percent. The bar is not set nearly that high, despite the disappointing guidance, they're still growing and they're approaching break even on ebitda.

This video is not financial advice and i personally have no stake in tel doc at the time of publishing this video. But i will say this: if you buy shares today in the 30s you're at least better off than kathy wood, who is buying them last year. For almost 300 a piece all right, guys that wraps it up for this video. What do you think about teletalk? Do you agree with kathy wood? That has the potential to be the amazon of healthcare, or do you think it's just an overhyped call center for doctors? Let us know in the comments section below, as always.

Thank you so much for watching and we'll see in the next one wall, street millennial signing out.