Home Market News The Road to Redemption: Can Teladoc’s Stock Stage a Comeback?

The Road to Redemption: Can Teladoc’s Stock Stage a Comeback?

The Road to Redemption: Can Teladoc’s Stock Stage a Comeback?

Telemedicine guru Teladoc (NYSE: TDOC) finds itself in the throes of a tough battle. Since 2021, the company’s stock has undergone a harrowing freefall, plummeting by a staggering 90% over the last three years. To kick off 2024, another lackluster quarterly report further added salt to the wound, continuing to drag down its share price. Amidst this tumultuous backdrop, is there still a glimmer of hope for potential investors to consider placing their bets on Teladoc?

Despite the grim outlook, Wall Street analysts seem to see potential in the beleaguered company. With an average price target of $20.16, there is a possible upside of approximately 31% from the stock’s Friday closing price. But can Teladoc rise from the ashes and impress investors within the span of a year?

Sluggish Revenue Growth Raises Concerns

Teladoc has found itself on a quest to justify its value over recent times. Gone are the heady days of the pandemic-induced demand surge for its telehealth services. Once a beacon of hope for those in need of healthcare while distancing from others, Teladoc’s journey has hit a rough patch. The burning question lingers: Was Teladoc merely riding the pandemic wave, destined to falter when the tide recedes?

The naysayers are quick to nod in agreement. Teladoc’s report for the fourth quarter of the fiscal year, unveiled on Feb. 20, provided them with fresh ammunition. The company’s revenue for the period amounted to $660 million, reflecting a lackluster 4% uptick compared to the corresponding period the previous year. Teladoc’s revenue growth trajectory has taken a nosedive over the past trio of years.

Further red flags emerged for Teladoc. Revenue from its flagship BetterHelp service, a virtual therapy platform that previously served as a significant growth engine, stagnated at $276 million. Meanwhile, total visits registered an 8% year-over-year decline, settling at 4.4 million, with average monthly revenue per member for its U.S. integrated care arm dropping by 1% to $1.42. Understandably, investors are now beginning to look elsewhere for greener pastures.

Can Teladoc Mount a Comeback?

Although Teladoc’s recent quarterly performance left much to be desired, a few silver linings are worth noting. The company is making strides towards achieving profitability. In the last quarter, its net loss per share stood at $0.17, a stark improvement compared to the $23.49 loss reported in Q4 2022 when a substantial non-cash impairment charge related to an acquisition weighed down the results. Moreover, Teladoc’s margins continue to look robust with an adjusted gross margin of 70.7%, a slight increase from the prior-year quarter’s 70.4% marker.

Despite these positives, Teladoc’s stock is unlikely to witness a significant uptick unless it rejuvenates its revenue growth engine. The telehealth specialist has a blueprint in place to reignite growth. Teladoc believes there’s immense untapped potential within its existing client base, most of whom have yet to sign up for its chronic care offerings. Just 16% of its clientele currently leverage one or more chronic care products, up from 12% two years ago. Additionally, Teladoc is eyeing expansion in international markets, foreseeing vast opportunities beyond its shores.

Moreover, the company anticipates a surge in demand for therapy services, with a notable shift towards virtual care. Thus, there seems to be ample room for growth for its BetterHelp platform. Can Teladoc’s strategic initiatives win back investor confidence in the near term, aligning with the bullish price targets set by Wall Street?

Trading at around $15 per share and boasting a forward price-to-sales ratio below 1, well within the realm of attractive valuation, Teladoc’s stock stands poised for a potential upswing pending robust financial results or other favorable developments. However, Teladoc’s own guidance offers little reassurance. The midpoint of its 2024 revenue guidance hints at a mere 3% year-over-year growth, a far cry from the 8% recorded in 2023. A swift and substantial rebound for Teladoc seems like a risky bet.

Looking ahead, what do Teladoc’s long-term prospects hold? Despite the risks, there seems to be a glimmer of hope. The company’s ecosystem, encompassing 90 million virtual care members, provides a substantial source of recurring revenue. The global expansion of the telemedicine market, driven by the convenience it offers, bodes well for Teladoc. Furthermore, its robust margins position it favorably for future profitability if it can streamline its operations and pare down marketing costs. However, a full turnaround for the company appears to be a lengthy endeavor.

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Prosper Junior Bakiny holds positions in Teladoc Health. The Motley Fool has positions in and recommends Teladoc Health. The Motley Fool upholds a disclosure policy.

The expressed opinions and viewpoints in this content belong solely to the author and may not align with those of Nasdaq, Inc.