- Late last month, virtual healthcare company Teladoc Health (TDOC) experienced a post-earnings plunge.
- Despite the big drop, a recovery will prove difficult.
- With the prognosis unchanged, though, steer clear of TDOC stock.
Like many pandemic-era favorites, the situation has gone from bad to worse when it comes to shares of Teladoc (NYSE:TDOC) stock. Already down heavily from its 2021 highs, TDOC stock took another hard fall late last month, dropping 40% after its latest earnings report.
Add in this month’s sell-off in technology stocks, and it’s no surprise that shares in this virtual healthcare provider continued to perform poorly. These more recent losses are on top of the extended slide it experienced throughout 2021 and early 2022. In total, it’s fallen nearly 90% from its all-time high of $308 per share on Feb. 16, 2021.
You may think it’s on the verge of bottoming out. Yet, while the worst in terms of stock price declines may be behind it, that doesn’t mean a recovery is just around the corner. Rather, further drops — albeit at a slower pace — may be more likely. And here’s why.
The Diagnosis of TDOC Stock
Before getting into the prognosis for Teladoc, let’s take a look at the diagnosis. That is, what exactly is affecting both its operating performance, and its share price performance. First, the obvious. The unofficial end to the pandemic has been the main reason behind its big slowdown in growth.
In 2020 and 2021, its top line grew by 98% and 86%, respectively. As seen in its February guidance updates, though, it was already expecting to see revenue growth slow down to 25%-30%. Now, as seen in its most recent updates to guidance, it has again walked back estimates. For the year, it expects revenue to come in between $2.4 billion and $2.5 billion, or 18%-23% growth.
Second, rising competition has also affected its growth. High competition is also causing its advertising costs to go up for its BetterHelp mental health unit. In turn, these rising costs further challenge its eventual move to profitability.
Lastly, and on top of the issues affecting its underlying business, overall market sentiment has been a big issue that’s also affected the performance of TDOC stock. Specifically, that would be a shift from in-favor to out-of-favor when it comes to speculative growth stocks.
The Bad Prognosis for a Teladoc Recovery
The factors listed above have been the culprits behind Teladoc’s more than 90% drop from its all-time high. Worse yet, these same factors are still in play. Therefore, a comeback, even a partial one, will prove difficult.
Collectively, waning pandemic tailwinds limit its ability to speed back up revenue growth. Also, competition will also likely continue to heat up. And when I say competition, I don’t just mean other virtual healthcare pure plays. This industry has low barriers to entry. Big tech companies could easily move in and try to dominate the space.
Moreover, rising competition could also keep affecting its ability to move out of the red. Not-yet-profitable growth stocks aren’t getting much slack in the stock market right now. So any further signal that profitability is a long way away will apply more pressure to the valuation of TDOC stock.
Even in the event that these many issues clear up, it may not result in big upside for Teladoc shares. This stock has a slim-to-none chance of making it back to its past all-time high, or even half its all-time high for that matter. A valuation that high was not sustainable in 2021, and it’s not attainable now as it morphs into a slower-growing, more mature company.
Bottom Line on TDOC Stock
Going back to November, when it was still trading for over $150 per share, I’ve been bearish on Teladoc stock. At that time, it was showing symptoms of being a busted growth story. Flash forward six or so months, and these suspicions have been proven correct.
This stock continues to earn an “F” rating in my Portfolio Grader. It has a long-shot chance of making even a partial recovery. More disappointment, and a move to lower prices, may lie ahead.
A once-in-a-lifetime tailwind enabled it to reach lofty heights during the pandemic era. Not to mention, a market highly favorable to growth plays.
However, those days are long over. In today’s environment, it faces more intense competitive pressures. There’s also the challenge of a stock market more skeptical of growth plays. In short, there’s little hope that the prognosis for TDOC stock will change anytime soon.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
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