Good afternoon, As always, email us if you have any questions on any of the data or our takeaways - .
KEY CALL OUT
We're going to stick with a level-headed approach to analyzing the outlook for our stocks and will avoid getting caught up the Main St. Media narratives around Omicron. The data are what they are, and that's encouraging thus far. Delta is/was a legitimate issue, and we think that's what's been driving the majority of hospitalizations, particularly among the unvaccinated. All signs point to Omicron being milder in nature, which would be amazing. We're less clear on what helps the US Medical Economy manage the labor/staffing crisis from here (if you missed it, see this AM's morning brief for more).
All that said, consensus estimate trends continue to reflect near-term weakness for our universe and the potential for a late 1Q22 bottom, which looks like it's in sync with the Macro Team's call (whether it's MacroQuad 1 or 4). This week, NEO rotated out of MicroQuad 4 and into 1, which is still a short position but lower exposure (the outlook looks better from a NTM revenue perspective, but we've got to find out what's happened in 2H21 that drove that weak guide). Also, EXAS slipped back into MQ4 from MQ1, which we've been expecting. Last, we've got some work to do on the estimate trends for XHS, XHE, and ARKG, so keep an eye out for that!
CLICK HERE for the full weekly update (our Sector Distillation deck).
ESTIMATE REVISION TRENDS
MICROQUADS*
Noteworthy this week:
As mentioned above, NEO rotated up to MQ1, a "less bad" position for the stock (vs. MicroQuad 4), and EXAS slipped into MicroQuad 4 from MQ1. Will TDOC follow? A lot will depend on Teladoc's 4Q21 results and the company's JPM22 presentation. While that can be said about most of our stocks, we think TDOC is in a "show us (bears) we're wrong" phase here as it transitions from EV/Sales -> EV/EBITDA. Slowing or decelerating revenue estimates are a problem for stocks with or w/ out Macro Quad 4 to help. We've included MicroQuads 1 and 4 below, but see the link to the full PDF for more.
As a reminder, if you have questions about the MicroQuad process, please try to find ~20 minutes to watch our Dec 30, 2020 call replay: Process & Utility of the Hedgeye Health Care #MicroQuads - CLICK HERE for event details (includes video link and materials link).
We're adding the performance of the model portfolio here this week with some updated data points:
Position Monitor Stocks**
All data available upon request. Please reach out to with any feedback or inquiries.
Best,
Thomas Tobin
Managing Director
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William McMahon
Analyst
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Justin Venneri
Director, Primary Research
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*Please note, not all Position Monitor names make it into the MicroQuad output - most likely due to a lack of sufficient historical trading and estimate data.
**We may show stocks that we have data for but the correlation fails to meet the criteria for MQ bin inclusion week-to-week.
