Teladoc (NYSE:TDOC) stock recently cratered to a new 52 week low following it’s Q1 report. Some of it’s shortfall was attributed by management to longer sales cycles in the insurer and employer space in addition to competitive concerns. But while TDOC is struggling to sign new insurers and employers, DarioHealth (NASDAQ:DRIO) seems to be thriving. In fact, the day after the TDOC report, an analyst covering DRIO, LifeSci Capital, came out with a note speculating that Dario Health is in fact taking business from Teladoc. This analyst reiterated a $31 price target. The stock is currently trading under $5. This represents a 6x potential return.
TDOC and DRIO have traded in lock-step for most of the last two years but since TDOC’s report, DRIO has dramatically outperformed, down just 5%, while TDOC is down a staggering 46%. This divergence in stock performance is a clue that many investors also feel that DRIO may be taking business from TDOC. One reason why risk assets drop in a rising interest rate environment is a higher cost of capital which growth companies need to reach profitability. In some cases, capital may not even be available. These dynamics cause investors to speculate about future dilutive offerings on bad terms which could hammer a stock price and keep it depressed for the long-term.
