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Has Teladoc Stock Hit Bottom? Looking for the Silver Lining

Thursday was… not a very fun day to be a shareholder in Teladoc Health (TDOC).

Shares of Teladoc plunged 40% yesterday after the telemedicine pioneer reported a mind-boggling $41.58 per share in losses for its fiscal first quarter 2022. Was that loss as bad as it sounds? Here’s a hint: Before earnings were announced, all of Teladoc stock cost only $56 per share — so in one quarter, Teladoc basically lost about 74% of the value of the company.

Needless to say, Teladoc “missed earnings” with this result. Analysts had forecast only a $1.31 per share loss. Teladoc missed on sales as well, if not by quite so much, reporting $565.4 million in revenue where Wall Street had expected $568.8 million. However, management warned that it’s going to miss by much, much more before this year is through. For all of fiscal 2022, Teladoc says it expects to generate sales of about $2.45 billion — at least $100 million less than Wall Street’s forecast, and about $150 million less than Teladoc itself had previously predicted. 

And yet, Berenberg analyst Dev Weerasuriya thinks all is not yet lost for Teladoc.

In a report responding to the earnings news, Weerasuriya argues that investors’ knee jerk selloff of Teladoc stock — while understandable — was “likely overdone.” The bulk of Teladoc’s Q1 loss, after all, was due to a $6.6 billion non-cash goodwill impairment charge for its ill-considered Livongo acquisition, that will not be repeated going forward. Meanwhile, Weerasuriya notes that Teladoc still grew sales 25% in the quarter, and is likely to grow its revenues at least 15% annually from here on out — if not 20%, or even 30% — and should be able to earn as much as 15% operating profit margins on these revenues.

This is not to say that Weerasuriya is entirely happy with Teladoc stock right now. To the contrary, he admits that the market for telehealth is looking much more competitive now than it once was, and indeed, “competition is disrupting Teladoc’s business.”

Competition is also making the business more costly: “An increasingly crowded marketplace for ad dollars is driving up customer acquisition costs,” warns the analyst. Finally, it’s apparently taking longer to sell chronic care services — which is a big problem because, as Weerasuriya notes, chronic care is “the long-term growth driver” for Teladoc (emphasis added).

All that being said, Weerasuriya still argues that Teladoc is worth at least $55 based on its projected growth rate and profit margins, and could be worth even more than that. Indeed, while Weerasuriya pleads for time to conduct a “deeper look” into the problems afflicting the company, for the time being he’s sticking with a $141 per share price target on the shares.

If that’s the right price tag, it would mean that Teladoc stock could more than quadruple from here. So unless and until he’s convinced he’s wrong about that, Weerasuriya is maintaining his “buy” rating on the stock. (To watch Weerasuriya’s track record, click here)

What does the rest of the Street make of TDOC’s prospects? 9 other analysts join Weerasuriya in the bull camp, and with an additional 18 Holds, the analyst consensus deems the stock a Moderate Buy. Going by the $63.06 average price target, shares are anticipated to be changing hands for ~80% premium a year from now.  (See TDOC stock forecast on TipRanks)

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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

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