The pandemic, while wreaking havoc across the world, brought about a revolutionary shift towards remote working and opportunities. The initial phases of the outbreak thus handed over massive benefits to certain stay-at-home type stocks like Teladoc Health Inc. (TDOC).
The leading provider of virtual healthcare services stock shot up to nearly $300 a share in early 2021, but it currently sits at just $33.75 per share, a staggering decline of over 75%. The high-flying days witnessed by the pandemic winner have come to halt and investors are disappointed in the adverse price action as of lately. While the world shut down and dealt with the fear of the virus, TDOC provided high-quality healthcare solutions to them inside the safe boundaries of their homes. But the stock is currently down over 60% just in 2022 as the world once again enters a dark phase of economic instability while companies focus on bringing their physical work functionality post the pandemic hype.
Amid the downfall of TDOC came another lackluster news of huge losses in the recent quarterly earnings, despite revenue improvement and overall performance in such tumulus times. While the loss was linked to its Livongo acquisition’s goodwill impairment, investors were still widely disappointed as the company cut down its full-year outlook owing to the impairment charges and certain other reasons. While most view TDOC as a failed company, the truth cannot be farther from it, as all is not lost and the telehealth industry is expected to continue booming. So, is it the best time to buy TDOC or not? Let’s have a look.
TDOC’s Latest Earnings
The Major Highlight
The headline from the company’s Q1 2022 earnings shared at the end of April was its net loss of $6.7 billion. This figure came against the year earlier’s loss of just $200 million. This huge swing year-over-year came from a goodwill impairment charge related to the company’s 2020 acquisition of Livongo, which is a chronic condition management company. The impairment charge was a result of the sustained decline of TDOC share price in addition to various market-based factors.
While a goodwill impairment charge appears as an operating loss on the income statement of a company as well as a decrease on the balance sheet, it is essentially the value of intangible aspects of an acquired business. Given that it’s not a cash expense, it is added back to the cash flow statement, thus, not impacting the overall cash flows of the company. But despite this, the huge impairment charge came as a shocker to investors as the net loss widened to $41.58 a share against the year ago’s $1.31 per share. However, the adjusted loss per share of 47 cents was still narrower than the expected 55 cents.
TDOC’s overall earnings results mostly came in line with its Q1 guidance, with most metrics exceeding or near the top end of the guidance. Revenue stood at $565.4 million (inline) with a 25% YOY increase from $453.7 million. However, the revenue did fall below the expectations of $569 million for the quarter.
Moreover, the total U.S. paid memberships, fee-only access, and total visits, all exceeded or met the top end with respective YOY growth of 5%, 14%, and 35%. The metrics were $54.3 million, 25.2 million, and 4.5 million for the quarter, respectively. The adjusted EBITDA also came near the top end of the guidance at $54.5 million for Q1 2022.
TDOC’s 2022 Outlook
According to the company, TDOC’s direct-to-consumer mental health service, BetterHelp has been performing below the expectations. This, on top of the huge impairment charge, led the company to cut back on its 2022 guidance. Therefore, the revised guidance has the revenue pegged at $2.4-$2.5 billion against the previous $2.55-$2.65 million. Adjusted EBITDA is now expected to be $240-$265 million against $330-$355 million and net loss $43.50-$43.00 per share against $1.60-$1.40 a share.
On the other hand, total U.S. paid memberships remain unchanged at 54-56 million, while fee-only access is also nearly the same at roughly 25 million. Furthermore, total visits for 2022 dropped just 0.5 million in the revised guidance to 18.5-19.5 million against 18.5-20.0 million.
Even with the guidance reduction, TDOC is still looking to grow by 20% in its revenue, and being a leader in its space, it could lead to outsized gains over the long term. The stock maintains a “HOLD” ranking from Zacks, with most deeming it a good long-term growth stock as the company delivered nice YOY improvement despite the macroeconomic conditions and decreased hype in the market. The company has continued delivering YOY improvement in its revenue and most key metrics while remaining on top of its space.
Additionally, the telehealth market is expected to continue growing with a CAGR of 32% by 2028. With its continued expansion through its acquisitions of BetterHelp, Healthiest You, and Livongo and YOY revenue improvement while being a market leader, TDOC is poised for some nice gains amid the growing industry.
However, risks exist as the wider market continues its downfall amid macroeconomic instability and increasing competition. Buying the stock at the present brings the opportunity of saving much with its beaten-down price, as Cathy Wood did the same by buying over $20 million worth of TDOC as it tanked after the earnings. While the stock might not be a “BUY” from analysts at the moment, it is ridiculously cheap right now with a bullish long-term outlook from most. The opportunity in TDOC extends long beyond just a pandemic play.