Teladoc’s (TDOC) recent second-quarter financial report reflects its difficulties gaining traction in the fiercely competitive telemedicine arena. The company’s ongoing struggle to attract patients is apparent. Total visits have fallen from 4.7 million just a year ago to 4.2 million. In an attempt to right the ship, the company recently appointed a new CEO with a proven track record in growing, innovating, and advancing new models in healthcare. With this new appointment, hopes are high that the new CEO can give the company a lifeline before the ships sinks.
Still, concerns remain, and the sharks are circling. After posting Q2 results, the new management team withdrew the previously stated financial outlook for 2024 and its three-year outlook, which is never a good sign. The stock is down over 66% year-to-date, pushing it into value territory. However, investors might want to stay on the sidelines until management can produce evidence of a turnaround.
Teladoc Gets a New Captain
Teladoc is a global provider of virtual healthcare services and operates under two segments: Teladoc Health Integrated Care and BetterHelp. The former provides a variety of medical services including chronic condition management. The latter is a digital platform for licensed practitioners’ online counseling and therapy services.
In June, Teladoc announced the appointment of Charles “Chuck” Divita as its new Chief Executive Officer and board member. Divita comes from GuideWell, a prominent health solutions organization, where he was Executive Vice President of Commercial Markets, managing $23 billion in revenue, responsible for Florida Blue’s various business segments, and overseeing supporting functions.
Analysis of Teladoc’s Recent Financial Results
The company reported Q2 2024 results that showed a mixed picture. Revenue of $642.4 million marked a 2% year-over-year decrease from $652.4 million and missed analysts’ expectations of $649,65 million. U.S. revenue dropped by 4%, whereas international revenue grew 12%. Also, a net loss of $837.7 million, or $4.92 per share, marked a considerable increase from the $65.2 million loss reported in Q2 2023.
This was primarily driven by a non-cash goodwill impairment charge of $790.0 million related to the company’s BetterHelp segment. Adjusted EBITDA increased by 24% to $89.5 million compared to Q2 2023. Furthermore, the GAAP gross margin for Q2 2024 slightly decreased to 66.7% from 67.5% in Q2 2023. As a result, the company reported earnings per share (EPS) of -$0.28, which exceeded analysts’ expectations of -$0.34.
As mentioned at the beginning, TDOC’s management withdrew the previous financial outlook for 2024 and its three-year outlook, which was reaffirmed as recently as April 25, 2024.
What Is the Price Target for TDOC Stock?
The stock has been on a volatile downward journey, posting a beta of 2.14 as it shed over 95% in the past three years. It trades at the low end of its 52-week price range of $8.73 – $30.41 and continues to demonstrate negative price momentum, as evidenced by trading below its 20-day (9.68) and 50-day (10.86) moving averages. The P/S ratio of 0.5x appears to be a significant discount compared to the Health Information Services industry average of 2.3x.
Analysts following the company have taken a cautious stance on TDOC stock. For example, JPMorgan (JPM) analyst Lisa Gill, a five-star analyst according to Tipranks’ ratings, recently lowered the price target on the shares from $16 to $9 while maintaining a Neutral rating. She noted the continued headwinds, persistent uncertainty around BetterHelp, and the current lack of visibility post-guidance withdrawal.
Teladoc is rated a Moderate Buy based on 19 analysts’ recommendations and price targets. The average price target for TDOC stock is $10.34, representing a potential 43.02% change from current levels.
Final Thoughts on Teladoc
Teladoc is navigating through daunting challenges in the highly competitive telehealth sector. Falling patient visits, shaken confidence from investors, and a stock that has dropped over 66% year-to-date have led to a change at the helm with the company appointing a new CEO. However, the new management’s decision to withdraw the company’s previously stated financial outlook for 2024 and its three-year outlook raises questions about its future trajectory.
While the stock trades at a significant discount to industry peers, it appears to be more of a value trap than a value at this point. There’s hope that Teladoc’s new leadership might steer the company toward a much-needed turnaround, but until there are clear signs that’s happening, investors may want to find a bigger boat.
