Quest outstrips healthcare innovation stocks Moderna and Teladoc

Healthcare innovation became a central focus during the Covid-19 pandemic, with companies including Quest Diagnostics, Moderna and Teladoc supplying tests, vaccines and virtual doctors, respectively. As global lockdowns ease in 2022, each company’s stock price is slipping.

Healthcare innovation was a hit theme during the pandemic as the world desperately sought next-generation vaccines, Covid-19 tests and virtual medical advice. However, as lockdowns ease, the industry has hit a hump, sending the share prices of Teladoc [TDOC], Moderna [MRNA] and Quest Diagnostics [DGX] lower.

All three stocks have dived so far this year amid uncertain market conditions, thanks to rising inflation and interest rates. The Quest share price appears to be holding up best, with a year-to-date slump of 20.5% up to the close on 29 June. In comparison, shares in Moderna have tumbled by 43.8%, while Teladoc’s stock has crashed out 62.6% over the same period.

While Teladoc, Moderna and Quest have hit a rocky patch, there appear to be potential opportunities for all three to recover. Around $8.3trn is spent on healthcare worldwide with almost half in the US alone, a figure that’s thought to be growing more quickly than the general worldwide economy.

CDC grants Quest access to test monkeypox

Founded in 1967, Quest Diagnostics — a medical research company and commercial lab, which also provides Covid-19 tests, as well as other diagnostic services — saw its share price gain 45% in 2021.

However, with volumes of Covid-19 tests expected to decline in its upcoming earnings, analysts at Jefferies have lowered estimates for the company's Q2 2022 results, which are due on 21 July, down to $2.27 per share from a previous forecast of $2.31.

Quest had saw an earnings beat at its first-quarter results in April. It had reported $3.22 earnings per share, 10.7% above the estimate of $2.91. The company also delivered revenues of $2.61bn for Q1, above Jefferies’ consensus estimate of $2.64bn.

Quest was recently recruited to test for cases of monkeypox by the US Centres for Disease Control and Prevention, which could be a tailwind for the company’s upcoming earnings.

The consensus among 18 analysts at CNN Money is to ‘hold’ the stock, with 14 analysts offering a median target price of $150, which would represent a hike of 9% from the closing price of $137.63 on 29 June.

Teladoc continues to grow members

With in-person doctor appointments back on the agenda, it’s been a tricky year for remote healthcare provider Teladoc. The stock’s latest close of $33.35 on 29 June is a long way from Teladoc’s all-time high of $294.54 in February 2021. The company’s shares rocketed by 252% from the start of 2020 through to this February peak.

The company has had other woes. In 2020, the company acquired Livongo Health, for a huge $18.5bn, an amount now regarded as too high. Recently, Teladoc announced a $6.6bn non-cash goodwill impairment charge as a result.

Teladoc may appear too risky for some investors, especially as it’s yet to turn a profit. Morgan Stanley analysts recently predicted US shares will tumble by another 10%, with a recession looking increasingly unavoidable. The S&P 500 has fallen nearly 19.9% so far in 2022. However, between Q1 in 2021 and Q1 2022, Teladoc saw its US paid members increase from 51.5 million to 54.3 million, with revenue per US member jumping to $2.52 from $2.09.

At the end of April, analysts at Barclays lowered their target price on Teladoc stock from $77 to $45. At CNN Money, 23 analysts giving 12-month price forecasts for Teladoc offer a median target of $42, which would be 22.38% rise from its close on 29 June. A consensus of 28 analysts proclaim Teladoc stock a ‘hold’, with 20 offering this rating.

Moderna continues to ramp up vaccine production

As one of the big Covid-19 vaccine makers, Moderna was a name on everyone’s lips in 2021. However, so far in 2022 its stock has lost half its value. By contrast, in 2021 it rose 143.1%, and reached a peak of $484.47 in August 2021 – a massive 239% above its most recent close on 29 June of $142.81. Moderna’s share-price slump has arrived as demand for Covid-19 jabs wanes, with warnings of oversupply in some parts of the world.

However, it isn’t all bad news for the Cambridge, Massachusetts-based company, which was founded in 2010. Its Q1 2022 performance beat expectations, delivering revenues of $6.1bn, compared to $1.9bn for the equivalent period in 2021, a rise year-over-year of 221%. Product sales for its Covid-19 vaccine for the first quarter of 2022 were $5.9bn, in contrast to $1.7bn during Q1 2021.

The company has a number of new vaccines on the horizon, which might revive its share price. “Beginning in the fall of 2022, our robust Phase 3 pipeline could lead to three respiratory commercial launches over the next two to three years,” said CEO Stéphane Bancel at the Q1 earnings release. These would include a respiratory mRNA vaccine for children under age six.

At CNN Money, 13 analysts offer a median 12-month price target of $199.00, up 39.3% from its latest close. Amongst 19 analysts, the consensus is to ‘hold’, with 10 offering this rating.