6/13/24 - $tdoc - interesting sub $10, but want <$8

6/13/24 :: VROCKSTAR :: TDOC

revisiting this one b/c i had flagged to myself to "not care" until we hit $10. well here we are on 6/13, at $10.

so what gives, do we start buying, get interested or just hand sit.

my bias is to hand sit still. the tape is dramatically different than when i made this comment in early april - and this company as well as others that are "unprofitable, not opex leverage inducing, not growing like a weed"... the market says i don't want.

we gotta respect mr. market. those r the rules fam.

so what's this thing objectively worth given meager (LSD - low single digit) sales growth?

given no opex leverage? given they seem to be a marginal share loser in what would seem like a promising category of telemedicine that defn got a pull-forward from covid but is still giving some back...

trends.google.com/trends/explore?date=all&q=/g/11c3krgywp,/g/11df0pkp5v,/m/04dqyb&hl=en

i'd posit one way to look at this is to use my R&D rule of thumb. at 25% discount rate at $350 mm a year invested then double that - it's $2.8 bn - a 25-30% bump from the enterprise value today.

but the mkt won't pay for that logic - bc the results suggest the discount rate on R&D is either unknowable or much much higher. so $2.8 bn is the ceiling valuation. and 25-30% upside isn't amazing (we just did 15% a day in AVGO results - so that's the bar guys, good charts, good results, rips).

at $8 we basically get this thing at a discount to gross profit, which buys us some time to turn that opex inflection, see a few quarters and probably not go too much lower and it's in play (take out potential).

conclusion - for those who know the company well, and if ops r looking decent - it's an obvious buy here - very shorted. but for me - that covers everything, i just don't see the allure of jumping into a difficult turn around, chart, financials. i need a heady discount.

so i'm setting a flag at $8 and we update this thinking if/as we get there. and if it just rips from here, we let it go. congratulate those putting their nuts on the line. but i won't be one, not yet and not in this tape

V