What Happened: Shares of digital medical services platform Teladoc Health (NYSE:TDOC) jumped 7.4% in the morning session after stocks continued to rally, and both the S&P 500 and NASDAQ Composite made 52-weeks highs. This follows a dovish stance from the Fed after its monetary policy meeting. On December 13, 2023, the Federal Reserve maintained its key interest rate for the third consecutive time, holding it within the targeted range of 5.25%-5.5%.
Additionally, committee members signaled a more dovish stance for 2024, anticipating at least three quarter-point rate cuts, roughly aligning with market expectations but more accommodative than Fed officials' previous statements. The market is focusing on this change.
The Fed Chair added that "Inflation has eased from its highs, and this has come without a significant increase in unemployment." This sounds a lot like the "soft landing" many market participants were hoping for, where inflation comes under control without damage to the economy that could hurt overall consumer demand.
In line with the Fed's assessment, on December 12, 2023, the Bureau of Labor reported a slight decline in inflation, attributed to lower gasoline prices and a general easing of price pressures in the U.S. The consumer price index (CPI) for November showed a 3.1% increase from the previous year (in line with market expectations), down from 3.2% in October, indicating ongoing disinflationary pressures.
As a reminder, lower rates are good for stock valuations, especially for tech companies where the market needs to discount back cash flows further out in the future. When the math is done to discount these cash flows back to today, a lower assumed discount rate leads to higher present values.
Is now the time to buy Teladoc? Find out by reading the original article on StockStory.
What is the market telling us: Teladoc's shares are very volatile and over the last year have had 33 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 5 months ago, when the stock gained 10.1% on the news that the company reported a bullish 'beat & raise' second quarter. Specifically, Teladoc beat slightly on revenue and more convincingly for adjusted EBITDA. Adding to the positives, the company raised full year guidance for revenue, adjusted EBITDA, and EPS. While next quarter's revenue guidance came in slightly below Wall Street's expectations, the market seemed focus on the full year guidance raise.
Additional tailwinds to the big increase in Teladoc shares (in addition to the strong quarter itself) are sentiment and short interest.
Going into earnings, market and investor sentiment were negative. As an example, Jefferies published a June 26, 2023 report calling out how "telehealth is becoming commoditized" and that "slowing industry growth overall raises questions around achievability of LT targets." Additionally, short interest in the stock was 16% going into the quarter.
Teladoc is down 6.2% since the beginning of the year, and at $21.17 per share it is trading 36.2% below its 52-week high of $33.20 from February 2023. Investors who bought $1,000 worth of Teladoc's shares 5 years ago would now be looking at an investment worth $413.91.