2 Beaten-Down Stocks to Avoid in the Tariff-Fueled Correction

Prosper Junior Bakiny, The Motley Fool

Sat, Apr 12, 2025, 11:05 AM 4 min read

With equity markets reeling due to President Donald Trump's tariffs, many investors are taking this opportunity to buy shares of top companies on the dip. It's a great strategy, but it's essential to avoid those companies that only look undervalued but actually aren't.

Some stocks are lagging the market for good reasons -- because their businesses look shaky and their prospects uncertain. These are the corporations to avoid even as they fall along with broader equities. Let's consider two examples: Teladoc Health (NYSE: TDOC) and Tandem Diabetes Care (NASDAQ: TNDM).

Teladoc Health, a telemedicine specialist, might not feel a substantial direct impact from Trump's tariffs. The company makes money from subscriptions to various virtual care offerings, including a primary care unit, a therapy segment called BetterHelp, and a chronic care business.

However, Teladoc has other issues that make the company unattractive. Since the pandemic started receding, Teladoc's revenue growth has declined substantially:

BetterHelp, once a key growth driver for the telehealth expert, faced stiff competition and appears to be losing market share. In the fourth quarter, BetterHelp's revenue declined by 10% year over year, while the platform's number of paying users dropped by 6%.

Moreover, Teladoc remains unprofitable despite its high growth margins. The company cannot keep expenses -- particularly marketing costs -- down, because it's seeking to establish itself as a leader in the expanding telemedicine industry.

One of Teladoc's most exciting growth opportunities comes from its international expansion efforts. In the fourth quarter, international revenue grew by 10% year over year to $105.1 million. Total revenue was down 3% to $640.5 million. Here's the issue, though: These international initiatives might lead to significant increases in the company's expenses. It's not clear whether this faster-growing segment will be enough to allow Teladoc to turn profitable.

True, the company is working on other initiatives. It could earn third-party coverage for BetterHelp, which might jolt the platform's growth. It also launched several artificial intelligence initiatives that could attract more customers and improve efficiency.

That said, Teladoc Health's poor results in recent years and lack of a clear path to profitability make it far too risky a stock to invest in right now.

Tandem Diabetes Care develops innovative insulin pumps. One of its best-known devices is the t:slim X2, whose claim to fame is its size. It's a discreet option that can still hold about as much insulin as most of its competitors. Patients can also pair this pump with other devices, such as DexCom's continuous glucose monitoring systems, to automate insulin delivery.