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Avoid Teladoc, Roku, and Mobileye

Markets reward investors who buy companies that grow. To avoid losses, they do not buy broken or overvalued companies.

Last week, Teladoc (TDOC), a provider of virtual health care, posted a 49-cent per share loss. Revenue increased by only 2.7% Y/Y to $646.13 million. In Q2, the firm will lose between 35 cents and 45 cents a share. When membership is growing with solid figures while revenue fails to increase meaningfully, it indicates that Teladoc is a broken business. It is unlikely to recover from overpaying for the merger with Livongo at $18.5 billion.

Roku (ROKU) slumped by 10% to close at $56.35 after posting Q1/2024 results. It lost $0.35 a share, even as revenue rose by 19.0% Y/Y to $882 million. Furthermore, the 1.6 million Q/Q increase in streaming households, to 81.6 million, did not result in profitability for the quarter. Streaming hours increased by 5.7 billion Y/Y to 30.8 billion.

Roku has over $2 billion in cash and free cash flow growth. Expect the stock to move nowhere at best.

Mobileye (MBLY), which Intel (INTC) spun off in an IPO, posted weak Q1 results. A slowdown in EV adoption is a headwind for the firm. The firm reported only $160 million in annual operating income ($40 million in Q1), compared to its $23.5 billion market cap. While the $1.2 billion in cash limits the downside, MBLY stock is not a buy at this price.

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