After a rough 2024, Teladoc Health (TDOC) has seen its shares surge up roughly 45% year-to-date, catalyzed by a recent collaboration with Amazon for expanding access to its chronic condition programs and news of the acquisition of Catapult Health. The news aligns with Teladoc’s strategy to enhance early detection of health conditions, thus improving care while cutting costs and expanding margins. Despite the recent jump in share value, the stock still trades at a significant discount to industry peers, making it a potentially compelling option for value-oriented investors interested in healthcare stocks.
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Expanding its Digital Footprint
Teladoc Health is a provider of virtual healthcare services. The company functions through two segments: Teladoc Health Integrated Care and BetterHelp. The Integrated Care division is responsible for a variety of virtual medical services, including general to expert medical services, specialty medical services, chronic condition management, and mental health. Further, the segment also delivers enabling technologies and enterprise telehealth solutions crafted explicitly for hospitals and health systems.
The company has announced plans to acquire Catapult Health, a virtual preventive care provider, for $65 million. The transaction, set to close in Q1 of 2025, will allow Teladoc to detect health conditions early and direct patients toward their other services, including therapists and primary care providers. Medical professionals from Catapult will also be able to directly enroll eligible patients into Teladoc’s chronic condition management programs, an area the company has recently focused on. The all-cash deal includes an extra $5 million contingent payment to Catapult, which will operate as a wholly-owned subsidiary of Teladoc post-acquisition.
The purchase will help connect patients to Teladoc’s chronic care management programs, thus closing gaps in care. As part of this strategy, Teladoc joined an Amazon marketplace in January. This marketplace shows digital health benefits programs to consumers, allowing eligible users to find and enroll in Teladoc’s chronic care management programs. This initiative complements Teladoc’s recent growth during the COVID-19 pandemic and its subsequent cost-cutting and business restructuring efforts.
Challenging Results for 2024, Though Signs of Improvement
Through the first nine months of 2024, Teladoc’s revenue fell by 1% to $1.929 billion, with domestic revenue shrinking by 3%. However, the international revenue segment expanded by 13%. The Integrated Care segment registered a 5% revenue increase, while the BetterHelp segment saw an 8% decrease.
A significant non-cash goodwill impairment charge of $790.0 million was incurred due to changes in future cash flow estimates of the BetterHelp segment. This non-cash charge helped spur a net loss of $952.8 million, or $5.61 per share, for the first nine months of 2024. This was significantly higher than the loss of $191.5 million, or $1.17 per share, incurred during the same period in 2023.
Adjusted EBITDA in this period increased by 10% to $235.9 million, with the Integrated Care segment noting a 32% increase. However, the BetterHelp segment registered a 28% decrease. The GAAP gross margin was down by 1.4% compared to 2023, while the Adjusted gross margin remained stable. Cash flow from operations was slightly up, and capital expenditures were down, leading to an improved free cash flow of $113.4 million compared to $100.1 million in the same period in 2023.
Management’s projections for the fourth quarter of 2024 are cautiously optimistic. Revenue growth is expected to increase from 0% to 2.5% year-over-year. Further, the adjusted EBITDA margin is predicted to be between 12.25% and 13.75%. As for U.S. Integrated Care Members, figures are anticipated to increase to between 93.5 and 94.5 million.
Positive Momentum, But Caution Warranted
The stock has been on a downward trajectory since the end of COVID-19, shedding over 81% in the past three years. However, in the last six months, the stock has shown a strong rebound, climbing over 91% in that time. It trades near the middle of its 52-week price range of $6.76 – $21.74 and demonstrates positive upward momentum as it trades above the major moving averages. It trades at a deep discount, based on its P/S ratio of 0.90x compared to the Health Care sector average of 3.65x.
Analysts following the company have remained somewhat cautious about the stock. For example, Leerink Partners analyst Michael Cherny recently reiterated a Hold rating on the shares, noting uncertainty regarding the Catapult acquisition’s long-term value and financial implications.
Teladoc is rated a Moderate Buy overall, based on the recent recommendations of 13 analysts. The average price target for TDOC stock is $11.95, which represents a potential decline of -8.08% from current levels.
See more TDOC analyst ratings.
TDOC Stock in Summary
After overcoming a challenging 2024, the company has witnessed impressive growth thus far in 2025. However, despite this positive momentum, analysts advise investors exercise caution due to uncertainties regarding the long-term value of the Catapult acquisition. Nonetheless, Teladoc’s relatively discounted share price makes it a potentially appealing option for value-focused investors willing to bear the risk.
