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Here's Why Teladoc Health Stock Fell 16% in February

By Jon Quast - Updated Mar 4, 2021 at 11:01AM

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Management predicted robust revenue growth for 2021, but guidance for membership increases fell short of heightened hopes.

What happened

Shares of Teladoc Health (TDOC 5.65%) fell 16.2% in February, according to data provided by S&P Global Market Intelligence. During the month, the company dazzled investors with impressive full-year 2020 results. But its guidance fell short of expectations, leading to the majority of the stock's decline.

So what

For full-year 2020, Teladoc's revenue nearly doubled, up 98% to nearly $1.1 billion. Visits were up even more, with a 156% increase over 2019. It certainly was a stellar year, as the pandemic pushed the adoption of the remote healthcare services that the company provides.

A visibly frustrated man is pictured in front of a down stock chart.

Image source: Getty Images.

But Wall Street analysts were divided on guidance from Teladoc's management for 2021. Some looked at future revenue growth as a reason to raise their price targets on Teladoc stock. Management guided for full-year revenue of $1.95 billion to $2 billion, good for 78% to 83% year-over-year growth.

However, other analysts noted that Teladoc's management only expects paid memberships in the U.S. to grow to a range of 52 million to 54 million in 2021. For perspective, Teladoc ended 2020 with 51.8 million paid members in the U.S. -- meager growth to say the least. These analysts actually lowered their price targets for Teladoc, leading to the stock's decline for February.

Now what

I can appreciate Wall Street's desire to see better increases in memberships for Teladoc. But to me, the company's guidance dispels a widely held misconception with Teladoc. Many believed that it benefited from the pandemic in 2020 but would give back some of its gains. But if management's guidance is accurate, then it's holding on to its 2020 gains.

In other words, the adoption of telehealth took a giant step forward last year, and doesn't look to be taking a step back anytime soon. That bodes well for Teladoc's business long term, even if 2021 won't be as spectacular as 2020.

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