Teladoc (TDOC), a virtual health service provider and favorite of tech investor Cathie Wood, has been rolling over for many months now.
The once-hot stock has now shed 57% of its value from peak to trough. The latest round of market selling has certainly not helped the cause, exacerbating recent selling pressure on the name.
Despite the violent reversal in momentum, many analysts have opted to maintain their Buy ratings and stand by their price targets. For good reason, as the long-term growth story still holds up.
The average Teladoc price target is $203.20, which implies 53.2% worth of upside from current levels. Could it be that shares of Teladoc overswung to the downside? Or will there be a queue of analyst downgrades heading into year’s end?
At around 12.5 times sales, TDOC is by no means a traditional value play. Still, a lot of negativity has already been baked in, with concerns over company- and industry-specific headwinds, in addition to fears of higher rates taken into consideration.
As such, I am bullish on TDOC stock as it could hold its own better, even as virtual visits decline in a post-COVID environment. (See Insiders’ Hot Stocks on TipRanks)
Tough Quarterly Miss
There’s no question that Teladoc had a high bar heading into its second quarter. While the quarterly numbers were by no means abysmal or warranting of a further 20% decline in the stock, the mixed bag and EPS miss were enough to entice many to throw in the towel.
For the second quarter, Teladoc reported 41% year-over-year increase in organic top-line growth, alongside a wider-than-expected per-share loss of $0.86, missing the consensus estimate that called for a $0.56 loss.
Undoubtedly, the company has made a habit of reporting wider than expected losses over the past year. Despite a record number of virtual visits in the face of lifting COVID-19 restrictions, investors seem to be expecting the worst from the post-COVID world. The considerable losses certainly don’t help the cause.
Operating costs are going up, while the best of top-line growth may already be in the rearview mirror. If the pandemic is poised to go endemic at some point over the next 18 months, many potential patients will prefer an in-person visit with their doctors, rather than a digital one.
After all, a doctor can only get so much information virtually, with some illnesses or ailments being less practical to treat or diagnose via Teladoc.
Wall Street’s Take
According to TipRanks’ analyst rating consensus, TDOC stock comes in as a Strong Buy. Out of 21 analyst ratings, there are 13 Buy recommendations, and eight Hold recommendations.
The average Teladoc price target is $203.20. Analyst price targets range from a low of $142 per share, to a high of $291 per share.
Bottom Line
In anticipation of a bleaker environment and continued lowering of the quarterly earnings bar, Teladoc already looks to have had the Band-Aid ripped off. R&D expenses are expected to continue rising, but it is a next-generation technology company, so such should be expected.
The next cause for concern is rising competition in telehealth, and its potential to cause Teladoc’s growth to go in reverse. With some very high customer satisfaction marks from J.D. Power, though, signs point to Teladoc’s service being better than the pack. For that reason, the width of Teladoc’s moat may be underestimated.
Disclosure: Joey Frenette doesn’t own shares of any mentioned companies at the time of publication.
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