2 Beaten-Down Stocks to Avoid Like the Plague in 2022

Fears over an impending recession have led to investors dumping many fundamentally weak stocks this year. Walt Disney (DIS) and Teladoc Health (TDOC), which have been lost significantly year-to-date due to their weak fundamentals, could be best avoided now. Read more…

The Fed’s aggressive policy tightening to control the surging inflation has significantly increased the odds of the economy slipping into a recession. The U.S. economy contracted 1.6% in the first quarter and 0.9% in the second quarter, making many analysts believe that a recession has arrived.

Moreover, the speculations over Speaker Pelosi’s visit to Taiwan worsening a troubled U.S.-China relationship are expected to add to the market volatility. As the economic and geopolitical uncertainties are expected to keep the stock market under pressure, fundamentally weak stocks could keep losing.

Given this backdrop, we think it could be wise to avoid beaten-down stocks The Walt Disney Company (DIS) and Teladoc Health, Inc. (TDOC), which are not expected to find a bottom soon.

The Walt Disney Company (DIS)

DIS engages in film and episodic production and distribution activities and operates television broadcast networks, studios producing motion pictures, and D2C streaming services. It sells branded merchandise through retail, online, and wholesale businesses and develops and publishes books, comics, and magazines.

For its fiscal 2022 second quarter ended April 2, 2022, DIS' pre-tax income from continuing operations came in at $1.10 billion, down 10.4% from the year-ago period. While its net income increased 47.8% year-over-year to $470 million, its EPS fell 46.9% to $0.26. As of April 2, 2022, the company had $13.27 billion in cash and cash equivalents, down 16.8% from the end of fiscal 2021.

The stock has lost 31.4% year-to-date to close the last trading session at $106.22, down 43.4% from its 52-week high of $187.58.

DIS’ POWR Ratings reflect this bleak outlook. The stock has an overall rating of D, which equates to Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

It has a D grade for Value and Quality. Click here to see the additional ratings for DIS’ Stability, Growth, Sentiment, and Momentum. DIS is ranked #12 of 18 stocks in the F-rated Entertainment - Media Producers industry.

Teladoc Health, Inc. (TDOC)

TDOC provides virtual healthcare services using a technology platform on a business-to-business basis. The company serves health employers, health plans, hospitals, health systems, and insurance and financial services companies worldwide.

On July 6, 2022, TDOC expanded its Primary360 offering by including in-network referrals and care coordination capabilities, free, same-day prescription delivery provided by Capsule, and in-home, on-demand phlebotomy with Scarlet Health services. As part of TDOC’s ongoing commitment to improving access and health outcomes, this should witness great demand in the future.

TDOC’s loss from operations for its fiscal 2022 second quarter ended June 30, 2022, increased 3822.3% year-over-year to $3.10 billion. The company’s net loss came in at $3.10 million, up 2217.7% from the prior-year period.

Its loss per share came in at $19.22, representing a 2134.9% rise from the year-ago period. As of June 30, 2022, the company had $881.16 million in cash and cash equivalents, down 1.4% from the end of fiscal 2021.

The consensus EPS estimate is negative for fiscal 2022 ending December 31, 2022. Its EPS is expected to decline at a rate of 39.4% per annum over the next five years. The stock has lost 59.5% year-to-date to close the last trading session at $36.81, down 76.5% from its 52-week high of $156.82.

TDOC’s weak fundamentals are reflected in its POWR Ratings. The stock has an overall F rating, which equates to a Strong Sell in our proprietary rating system.

TDOC has an F grade for Sentiment and a D for Value, Stability, Momentum, and Quality. Click here to see additional ratings for TDOC’s Growth. TDOC is ranked #79 of 83 stocks in the C-rated Medical - Services industry.

DIS shares were trading at $104.71 per share on Tuesday afternoon, down $1.51 (-1.42%). Year-to-date, DIS has declined -32.40%, versus a -13.45% rise in the benchmark S&P 500 index during the same period.

About the Author: Sweta Vijayan

Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market.


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