Teladoc Plunged 81%…Time to Buy?

March 2020. Worldwide stay-at-home orders. The worst public health crisis since 1918’s Spanish Flu outbreak.

Though the world was on lockdown, it didn’t stop turning — stocks like Amazon (AMZN) and Netflix (NFLX) soared to new heights, while others like Synchrony Financial (SYF), DISH Network (DISH), and Boeing (BA) suffered huge losses.

The push to keep people in their homes meant even the doctor’s office was off limits. It seems counterintuitive that individuals and families couldn’t or didn’t want to make health appointments during a pandemic, but this led to a surge in telehealth and Zoom appointments.

 

Teladoc Health (TDOC) was one of the first companies to launch telehealth services in 2002.

Fast forward 18 years and Telehealth had its time in the spotlight. In February 2021 the stock reached its highest ever share price at $294.54. But by May 2022, this stock had fallen to just over $30 per share.

While this isn’t the stock’s lowest ever share price ($9.97 on May 20, 2016), it really begs the question — is this latest plunge time to let go of your Teladoc shares and sell? Or is now the perfect time to buy Teladoc?

Cathie Wood isn’t throwing in the towel yet — but should you? Why is Teladoc plummeting? 

The Teladoc Euphoria

With the world at home during a worldwide pandemic, people needed doctors more than ever, yet in-person visits weren’t always possible.

While telehealth had been an option since the early 2000s, it was a perk rather than a necessity. 2020 changed that, and telehealth caught on fire.

But, even healthcare stocks like Bio-Rad Laboratories (BIO) and Moderna (MRNA) seem to be in freefall. The latter is ranked among one of the best biotech stocks to buy and hold. The euphoric fire of Teladoc’s virtual healthcare has fizzled — doused by the waters of sustained growth and profitability fears.

Teladoc Stock: From Sizzle to Fizzle?

In April 2022, Teladoc stock fell sharply to a 52-week low of $50. There was a short rally later that month but another drastic drop in May 2022. Will there be another rally that can lift TDOC out of distress?

The future looks gloomy for Teladoc. TDOC is surrounded by growing negative sentiment. After correction, it appears TDOC is still short on interest. But is the general market ignoring positive data?

YEAR	TELEHEALTH GLOBAL MARKET SIZE
2019	$41.63 billion
2020	$70.5 billion
2021	$62.4 billion
2022	$87.8 billion
2028 (projected)	$636.38 billion

For instance, experts expect the telehealth market to reach over $636 billion by 2028 – a compound annual growth rate (CAGR) of over 32%. The world is no longer in lockdown mode, but TDOC still has a vast addressable market even if growth is relatively decelerating.

For instance, in Q4 2021, Teladoc’s reported revenues were $483 million in the United States alone. The company’s revenue internationally was $71 million — a 40% YoY growth. With more potential health scares on the horizon, such as the recent monkeypox outbreak, international markets could grow substantially in the years to come.

That said, for a company considered high-growth, TDOC traded at a premium. Teladoc expects YoY growth for 2022 to be around 25% to 30% — the markets have, for the most part, ignored this slowdown in growth.

Is Teladoc Stock’s Current Price Fair?

The virtual healthcare industry is poised for significant growth in the coming years. In the short-term, though, the markets are punishing TDOC. The stock has fallen sharply — but is it still trading attractively?

Teladoc’s reported cash flow in 2021 was $194 million. If the company can increase paid memberships and operating cash flow, it’s likely that TDOC will begin trending higher.

On a valuation basis, the fair market value for TDOC sits at $39.57 per share, representing 25% upside at the time of research.

TDOC Short-Term Challenges

The good news is that, overall, TDOC could have a bright future. Acquiring Livongo Healthcare was met with harsh criticism because of:

• Speculation that Teladoc paid too much
• Neither company addressing glaring integration issues prior to the announcement
• Value of the merger was already figured in TDOC’s then trading price

Regardless, it resulted in a huge selloff of both companies shares. Even if the merged companies continued on their then-current growth trajectories, value acretion wouldn’t be reflected in share prices for at least 3 to 5 years, if at all.

What could have been celebratory resulted in a very costly decision. After the merger, TDOC traded at just 2.3 times its sales. Around the same time just a year prior, TDOC had traded at over 24 times sales.

Is It Time To Buy Teladoc? The Bottom Line

Even as health concerns are waning about mutant viruses, health risks remain elevated for the foreseeable future. Individuals without transportation or who are otherwise unable to visit their primary care providers in person will always be thankful for virtual healthcare. In this light, the need for services like Teladoc won’t reverse anytime soon.

But does that mean now is the time to buy TDOC?

If you’re a wary investor, sitting this one out for the time being is the safer option.

Add TDOC in your Watchlist and continue monitoring the growth trajectories in the virtual, mental, and chronic healthcare spaces. 

For those willing to take on a bit more risk, it might not hurt to pick up some TDOC shares at current prices. After all, TDOC intrinsic value sits almost 25% higher at near $40 per share.

Either way, create an alert on your Financhill dashboard to signal when TDOC shares trigger a Buy signal.

Share prices probably won’t see a rebound in the near future, but Teladoc has lofty goals of providing whole-person healthcare on a much grander scale. If they reach these goals, patients and investors alike will reap the benefits.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.