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Why Teladoc Health Stock Sank 18% Last Month

By Jeremy Bowman - Apr 2, 2021 at 4:16PM

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Shares of the telehealth company fell on a broader sell-off in growth stocks and as Amazon made further headway into the industry.

What happened

Shares of Teladoc Health (TDOC 1.65%) were moving lower last month as investors continued to sell high-priced growth stocks that have been pandemic winners. Teladoc, which saw demand for its telehealth services surge during the pandemic, clearly fits into that category. Rising interest rates also pushed investors growth stocks into value stocks and recovery plays.

The only significant piece of news that affected the stock was that Amazon (AMZN 0.45%) said it was expanding its Amazon Care telehealth service across the country this summer, which is seen as a threat to Teladoc. According to data from S&P Global Market Intelligence, the stock finished March down 17%.   

A mother and child teleconference with a doctor.

Image source: Teladoc.

The chart below shows its trajectory. 

TDOC Chart

TDOC data by YCharts

So what

Shares of Teladoc plunged in the first week of March along with a broad sell-off in growth stocks as investors responded to expectations of an accelerated reopening schedule and rising interest rates. These in turn incentivize rotating out of growth stocks as discount rates rise and investors see long-dated earnings as less valuable.

Teladoc shares remained volatile over the duration of the month even as the Nasdaq recovered its losses, a sign that pressure remains on the stock. 

On March 17, Amazon said that its Amazon Care service would expand nationwide, offering millions of individuals and families access to remote healthcare 24 hours a day, 365 days a year. The company also said it would expand its in-person clinics in cities like Washington DC, Baltimore, and others, showing it's making a major play in the healthcare sector.

Teladoc sold off on the news, though a number of analysts said that the response was overdone and that Amazon's expansion was expected.  

Now what

Teladoc is widely considered the leader in the telehealth sector as the company has grown both organically and through acquisitions, like its takeover of Livongo Health last year. However, competition is likely to heat up in the space, especially as the pandemic has accelerated demand for telehealth services. 

Investors should expect continued volatility from the stock since Teladoc is growing quickly but is still unprofitable and faces a lot of uncertainty as the telehealth industry evolves.

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Stocks Mentioned

Teladoc Health, Inc. Stock Quote
Teladoc Health, Inc.
TDOC
$33.28 (1.65%) $0.54
Amazon.com, Inc. Stock Quote
Amazon.com, Inc.
AMZN
$2,161.54 (0.45%) $9.72

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