| |  | TOGETHER WITH |  | | | Happy Friday.
We've covered a lot up here lately, let's dive right in today. | | | • | | The US economy unexpectedly shrank, but the underlying fundamentals look unexpectedly strong. | | • | | Teladoc joins the list of pandemic winners turned losers. | | • | | A new obesity treatment from Eli Lilly has led to the good kind of big losses at trial. | | | | |  | ECONOMY | US Economy Unexpectedly Shrinks 1.4%. Sobering Figure Belies Strong Fundamentals | | How often do you see the stock market go up in response to a surprise contraction in the world's largest economy? It’s a rare day; this week it was called Thursday.
The US economy shrank by 1.4% in the first quarter, its first contraction in two years. But as you peel back the layers, the data isn’t quite as scary as at first blush. | OK Consumer | | The economic contraction happened for three straightforward reasons: imports went up, exports went down, and business stockpiles fell short due to supply chain snarls. Measured on a year-over-year basis, the economy actually grew 3.6%, with 1.7 million jobs created and manufacturing output up 5%. “A substantial drag from trade — a result of weak exports amid a global growth slowdown, coupled with robust imports due to strength in both domestic demand and the dollar — will prove temporary, with trade flows normalizing as the year progresses," says Yelena Shulyatyeva, a senior economist at Bloomberg Economics.
Meanwhile, the US consumer — that essential driver of economic growth — remains as mighty as ever: | • | | Real final domestic sales, a metric that expresses underlying demand minus trade and supply chains, grew at a 2.6% annualized rate. | | • | | The Commerce Department said personal consumption, the largest segment of the US economy, rose 2.7%, annualized, in the first quarter, up from 2.5% in Q4 2021. | | | | Darlings du Jour: In the meantime, corporate earnings have reflected consumer appetite accurately all week. Companies that make up half the S&P 500’s market capitalization reported earnings; per Credit Suisse, 76% of them beat projections. On Thursday, the S&P 500 climbed 2.4%, while the technology-heavy Nasdaq 100 rose 3.2%, signaling that, despite the litany of woes besetting the world — inflation, war in Ukraine, lockdowns in China — the markets are surprisingly content with the global economy’s overall trajectory.
Take a Hike: One downside, for house hunters, at least: even amid continuing inflation, the solid consumer spending may mean the Federal Reserve will have few qualms about that half-point rate hike expected to land next week. | | | | | | TECH | Latest Earnings Report Sees Teladoc Take Massive Stumble |  | | Investors in telehealth service Teladoc may need more drastic intervention than a FaceTime doctor’s consultation after the company’s heartstopping bummer of an earnings report.
Like Peloton, Zoom, and other pandemic darlings, Teladoc is facing the aftershocks of post-shelter-in-place economics. On Thursday, the company’s revenue miss further accelerated its already dizzying stock market tumble. | A House Call a Little Too Close to Home | | The reported net loss of roughly $6.7 billion could be cause for a cardiac event in some quarters. An effective per-share loss of $41 (thanks to a $6.5 billion impairment charge) makes analysts’ forecasts of a loss of just 60 cents a share seem mind-bogglingly off the mark.
Down more than 90% from their February 2021 peak, Teladoc’s shares dropped roughly 40% on Thursday alone. The steep fall was driven in part by increased competition in the company’s niche. Amazon in particular has invested heavily into expanding Amazon Care, the telehealth service it launched last year.
Few are feeling the pain quite as acutely as Cathie Wood, whose struggling ARK Innovation ETF has a major stake in Teladoc. After Thursday, ARK shareholders are going to need a pulse check: | • | | ARK owns a 12% stake in Teladoc, which was worth around $1.1 billion at market close on Wednesday, according to Bloomberg. This makes ARK Teladoc’s largest shareholder. | | • | | Teladoc is ARK’s third-largest investment, behind Tesla and Coinbase. After starting 2022 at nearly $100 a pop, shares of ARK’s flagship Innovation ETF have lost more than half their value so far this year. | | | | Long-Haul Symptoms: Teladoc shares its symptoms with quite a few “growth” names who have struggled to live up to early hype. Online gig board Fiverr has seen its stock take a nosediverr of about 75% over the past twelve months. Shares of DocuSign, the electronic signature manager, are now lower than they were before Covid. If one thing is clear, it's that pandemic winners may be turning into endemic losers. | | | | | | SPONSORED BY THE MOTLEY FOOL | Flash Sale: Get 55% Off The Best Stock Picks | | | • | | Shopify in July 2016, which has returned 1,225% | | • | | All told the combined value of >$5 billion deals climbed to $456 billion in the third quarter, figures from Refinitiv show. | | • | | Heck, the average return of a Stock Advisor pick since inception is 372% | | | | | | | | PHARMA | Promising Obesity Drug From Eli Lilly Results in 20% Weight Loss | | A breakthrough new anti-obesity drug treatment could help millions and revolutionize healthcare.
With looming patent expirations on its established drugs, the timing is just what the doctor ordered for Eli Lilly, the pharma giant behind the discovery. | Pharma Heavy Wants Americans to Lighten Up | | Tirzepatide is not the catchiest name — surely, once the drug makes it through regulatory approvals, Lilly‘s marketing department will stretch for an elegant rebrand — but its potential is extraordinary. The treatment, delivered once a week as a shot, suppresses appetite and could boost energy expenditure by imitating the effects of two gut hormones.
According to the CDC, US obesity rates rose from 30% in 2000 to 42% in 2018. As a result, the annual medical cost of obesity in this country is currently $147 billion. A drug that helps reverse this worrying trend could also help reduce obesity-related conditions such as heart disease, stroke, diabetes, and certain cancers — some of the leading, and preventable, causes of premature death. In trials, tirzepatide produced highly promising results, which could change lives and bottom lines: | • | | Lilly’s trial included 2,500 adults with a body mass index classifying them as obese or overweight. Those who received a low dose of the drug lost an average 15% of body weight, or 35 pounds, over 72 weeks. Recipients of high doses lost an average 21% of body weight, or 50 pounds. | | • | | In its latest quarterly results, announced Thursday, Lilly reported that sales of its breakthrough diabetes drug Trulicity rose 20%, while sales of immunology drug Taltz were up 21%, with rheumatoid arthritis treatment Olumiant gaining 32%. The patent on Lilly's best-selling cancer drug Alimta expires this month, and one generic entrant is already in the market. The anti-obesity Tirzepatide could give the company, which grew its revenue 15% to $7.8 billion in the first quarter, four solid entreés on its earnings menu. | | | | "The data likely validates Street thinking that tirzepatide will become a dominant player in the obesity market," Mohit Bansal, an analyst at Wells Fargo, said in an investor note, adding that he anticipates $4 billion in peak sales.
First-Place Loser: Lilly’s results are the best so far in a wave of new treatments that could help tackle the obesity epidemic. If Tizepatide is approved by regulators, it will likely compete with Wegovy, a similar drug from Novo Nordisk that got the FDA green light last year. In studies, Wegovy led to an average weight loss of 15%. | | | | | | Extra Upside | | | | | • | | If You’re Not Early, You’re Already Late. A stunning $330 billion was invested in venture capital deals in 2021*. For many innovative companies, the deep availability of VC funding means they can stay private longer and grow bigger without the complexity of being a public company. For investors seeking high growth, that means if you’re not in pre-IPO, you may already be too late. Get your access to highly-competitive, venture-backed startups with Alumni Ventures. They make it easy to invest alongside the “ who’s who” of venture firms in the next great companies. Start here.* Partner. | | | | | | |  | Just For Fun | | | | | Written by Sean Craig and Brian Boyle. | Disclaimer | | | | Disclaimer: Returns as of 4/28/2022. Past performance is not an indicator of future results. Not all Stock Advisor picks have performed as well. All investing involves a risk of loss. Individual investments results may vary.
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