Shortly after releasing its quarterly report, Teladoc Health (TDOC) stock fell from about $56 to about $30. This already sounds bad for the company and its investors. It gets even worse, though, when you consider that the stock traded for more than $290 per share as recently as February 2021.
At first glance, this is surprising. Teladoc is a large telehealth company during a time when many people, including healthcare professionals, favor meeting online instead of in offices.
So, what happened?
Why is Teladoc going down so rapidly? Perhaps even more importantly, does Teladoc have a successful way forward that makes this a unique opportunity for investors to buy shares at low prices.
Teladoc Revenues Up But Shocking Net Loss
Teladoc Health is a global leader in telemedicine, so it’s not surprising that its most recent quarterly statement reported higher revenues and year over year growth.
During the first quarter of 2021, Teladoc reported $453 million in top line sales. The company generated $565 million in revenue during the same quarter of 2022; a 25% increase in year-over-year revenues.
That’s just one aspect of Teladoc Health’s financial health, though. The net losses from those quarters show a move in the wrong direction for the company. In 2021 Q1, the company reported a net loss of $199 million. During the first quarter of 2022, it had a net loss of $6.675 billion.
Why the spike?
A dip in AEBITDA also damaged investors’ faith in the company. It reported $56.6 million in the first quarter of 2021 and $54.4 million in the first quarter of 2022. That’s a 4% decrease, which might not seem like a significant amount until you see that it’s part of a year-long trend. From one year to the next, AEBITDA actually fell by 25%.
Why Do Teladoc’s Numbers Look So Bad?
There’s no way to get around it. Teladoc Health’s numbers look really bad.
Teladoc’s stock price hasn’t been this low since 2017, when it was cash flow negative. The Teladoc Health of 2022, however, is not the Teladoc Health of 2017. Over those years, it has quintupled its visit volume. It has twice as many paying members. Annual revenues are five times higher than they were in 2017.
Perhaps Teladoc Health’s stock had gotten too expensive at one point. $290 was a steep price to pay. Does it deserve the same price it had in 2017 before it overcame so many obstacles to become a global leader in telemedicine?
That seems unlikely.
Regardless, the quarterly report scared some investors, causing them to sell their shares. As the price fell, more panicked and followed their lead.
Now the valuation is looking quite attractive. A discounted cash flow forecast analysis reveals a fair market value of $46.81 per share, representing 22% upside from current levels at the time of calculation.
Couple that with the trend of top line growth and it’s hard to bet against Teladoc. It’s past 5 years have been truly spectacular:
- 2017 Sales Growth: 89.4%
- 2018 Sales Growth: 79.1%
- 2019 Sales Growth: 32.4%
- 2020 Sales Growth: 97.7%
- 2021 Sales Growth: 85.8%
Should You Buy Teladoc Health Stock?
There were legitimate reasons for Teladoc Health’s stock to lose value. But the crash was disproportionate to the company’s true value.
Does that mean now is a good time to buy Teladoc Health shares? From a valuation perspective, yes. The company is now trading at a sufficiently low price that the margin of safety is compelling.
If you go by Warren Buffett’s advice of buying a great company at a fair price, Teladoc fits the bill now. It’s crushed top line sales growth for the past 5 years and the future is bright.
Sales are forecast to grow rapidly over the coming 5 years too:
- 2023 Sales: $2.9 billion
- 2024 Sales: $3.5 billion
- 2025 Sales: $4.2 billion
- 2026 Sales: $5.04 billion
Not only that but in 2022, EPS is forecast to come in at -$1.45 per share but by 2026 it is estimated to be $1.11 per share. The flipping point when earnings per share are expected to go positive is in FY 2025. Admittedly that seems like a long way away currently. For conservative-minded investors, picking up shares ahead of that date could work out very well, however. And it’s hard to imagine looking out in time that today’s prices won’t reflect a real bargain.
#1 Stock For The Next 7 Days
When Financhill publishes its #1 stock, listen up. After all, the #1 stock is the cream of the crop, even when markets crash.
Financhill just revealed its top stock for investors right now... so there's no better time to claim your slice of the pie.
See The #1 Stock Now >>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.