- Teledoc Health (TDOC) stock is significantly more attractive after the price normalization.
- After a stellar performance last year, expect an even better showing this year.
- Risks remain with the stock, but its current price is highly enticing.
Teladoc Health (NYSE:TDOC) stock was one of the pandemic darlings, benefiting immensely from the digital transformation tailwinds. However, the speculative bubble that elevated digital stock prices has burst, leading to price normalization. TDOC stock has seen its value tank in the past year due to the market’s overreaction. Teladoc Health has a strong moat, healthy fundamentals and an incredible outlook to boot, unlike most coronavirus stocks.
TDOC stock was down over 75% from its peak price of $249 in August 2020. The pandemic boosted its stock as its underlying business saw a strong uptick in demand. However, in the post-pandemic reality, many tailwinds have now turned into headwinds. Therefore, companies like Teladoc are likely to struggle against tough comps. However, Teladoc has a model that will thrive for years to come over the long run.
| TDOC | Teledoc Health, Inc. | $62.01 |
Robust Outlook Ahead
2021 was a momentous year for Teladoc, marked by a sensational increase in sales revenues and a narrowing of losses. Last year, sales increased by 86% from the prior-year period to $2.03 billion, while total visits increased by 38%. Even though the business is still unprofitable, its losses decreased rapidly. Its loss per share declined from $5.36 in 2020 to $2.73. By 2022, it expects its net loss to fall from $1.40 to $1.60.
Moreover, Teledoc expects total visits to fall in the 18.5 million to 20 million range, which indicates a major increase from 15.4 million last year. Hence, its sales are likely to fall between $2.55 billion and $2.65 billion and rise to $3.2 billion by 2023. In expanding its revenue base, the company has sped up its merger and acquisitions activity in the past couple of years. Some of the startups it acquired include BetterHelp, Healthiest You, and Livongo.
Teledoc boasts a sublime outlook ahead for its services. Grand View Research suggests that the teleheath market is expected to increase by a whopping 32% by 2028. This mostly has to do with physician shortages due to an aging population in the West. With higher life expectancies and lower birth rates, the population will continue getting older and creating more healthcare demand.
This trend will play right into the hands of Teladoc, which aims to establish itself as a whole-person healthcare provider. Despite the competition, it has cemented its position as a leader in the provision of telehealth services.
Risks
Investing in Teledoc is not without its risks, though. Naturally, the healthcare sector is a highly fragmented industry with low switching costs. Therefore, a company similar to Teladoc can develop a slightly better product with competitive pricing and customers will most likely be disloyal to the company. Hence, despite the industry leadership, the competition risks with telehealth firms remain.
Moreover, the company’s revenues are concentrated among a handful of clients. Its top ten clients command more than 20% of total sales, which increased by over 4% from last year. Therefore, to maintain its lofty growth metrics, it needs to ensure that the large customers remain on board and don’t weigh down its stock price. Additionally, Teladoc might find it remarkably tough to compete and maintain its pricing power if margins decline.
Final Word On TDOC Stock
Teladoc’s results have shown that its business is becoming far more efficient while growing aggressively. Moreover, its total addressable market continues to grow with the shifts in the age demographic and the acquisition of new companies.
Analysts at Refinitiv believe that the stock is trading at roughly 50% lower than average estimates. At this point, it is tough to predict when the stock will rebound, considering how difficult the market conditions are at this time. Nevertheless, analyst predictions are largely positive and point to a healthy upside ahead.
For instance, analysts at Argus Research have recently upgraded the stock to a Buy from a previously assigned Hold rating. The research firm believes that after multiple years of operational losses, the company now has a clear path toward profitability. The fourth-quarter results showed “a rise in membership, utilization and per member revenue.”
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines