After hitting a high of $292.51 per share in February 2021, Teladoc (TDOC) shares plummeted by over $250 per share. This year alone the price of TDOC shares has plunged by over 67%.
Still, there’s plenty to like and the bull case has merit. The problem is so too does the bear case.
Which is right? Let’s find out.
Teladoc Is Down, But Not Out
Teladoc Health is the world’s foremost integrated virtual care system that delivers what it describes as “whole-person” health. Whether it be preventative care or on-demand urgent care, the firm’s virtual care offerings encompass everything from mental health to chronic conditions.
The company provides clinicians with telehealth devices and software. Its wide spectrum of products and services have made Teladoc an industry leader.
In 2020, shares of Teladoc soared because of the need for telehealth services. In response to government lockdowns and packed healthcare facilities, patients began to access basic services from the comfort of their homes.
These services continue to fuel the telehealth industry. It is anticipated that the industry will grow by a compound annual rate of 32.1% through 2028. Teladoc estimates it alone has a $261 billion total addressable market in the United States.
But after TDOC share price fell by more than 85% since its high in early 2021, many investors have given up on the telehealth stock — but is it too soon to jump to conclusions? Could a rebound be on the horizon?
The Bull Case: Teladoc is well-positioned
Despite some red flags, there is still plenty to like about Teladoc.
Yes, revenue growth is slowing. However, this is understandable following the tapering of lockdowns and move from remote work.
In the company’s Q2 2022 results, management reported impressive growth in visits and memberships. Revenue was better than expected, growing 18% year-over-year to $592.4 million, and the company’s margins improved.
Perhaps the greatest argument among bulls is Teladoc’s leadership in a market with massive growth prospects. The company’s current market cap is nearly $5 billion, which only brushes the surface of Teladoc’s true potential.
The industry is still in its infancy, and Teladoc is building a competitive edge that’s tough to ignore. The company benefits from a network effect. The more people who use it, the more value its services bring — and Teladoc already has an extensive network of customers, including half of all Fortune 500 firms.
The Bear Case: Poor execution
Teladoc’s acquisition of Livongo Health has caused many investors to lose faith in the company’s top brass. After paying over $18 billion, the deal was widely regarded as a bust, destroying billions in shareholder value.
To add to the woes, Teladoc took roughly $9.6 billion in impairment charges during the first half of this year.
Undoubtedly, Teladoc’s performance has fallen short of expectations. When combined with management’s lack of business updates and accurate guidance, these issues make it challenging to feel confident in the company’s future growth plans.
Telehealth is an industry that holds immense long-term promise, but weak execution will sink any company, including a leader like Telehealth.
Both the bulls and bears make valid points. So, what does the future hold for Teladoc stock?
Although Q2 revenue was up, Teladoc’s financials are somewhat worrisome. Management dramatically revised earnings estimates downward, so many investors are dumping this stock — but is it too soon?
Perhaps. After all, the company’s membership base grew by 2.3 million subscribers in Q2, reaching 56.6 million paid members. That is nothing to sneeze at, especially given revenue per subscriber hit an average of $2.60, up from $2.52 in the prior quarter and $2.31 in the prior year.
When we ran the numbers, we arrived at a fair market value of $36.83 per share, inferring a rise of 17.4% is possible.
This telehealth heavyweight could have a fairytale ending if you’re an aggressive investor. Right now, the stock is pretty cheap. Great returns are possible if you’re willing to take a chance and hold long-term. But expect the ride to be bumpy.