What happened
Shares of Teladoc Health (TDOC -2.12%) were sinking 11.3% this week as of the market close on Thursday, based on data from S&P Global Market Intelligence. The only announcement from Teladoc was that it plans to participate in the virtual J.P. Morgan Healthcare Conference next week. Obviously, that's not the reason its shares fell.
Instead, there were two other factors behind the decline for the healthcare stock. First, investors appear to be looking ahead to a brighter future with regard to COVID-19 despite the current surge in cases. Second, the overall stock market has been highly volatile, with the Federal Reserve confirming that interest rate hikes are on the way.
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So what
To some extent, investors have connected their expectations for Teladoc's fortunes with what happens with COVID-19. The underlying premise is that the company will benefit if the severity of the pandemic is worse because more people would be likely to turn to virtual care. On the other hand, the idea seems to be that the demand for virtual care would decrease if concerns about the coronavirus wane.
The actual experience reported by Teladoc thus far, though, undermines this take for the most part. For example, Teladoc's visits soared 37% year over year in the third quarter of 2021 despite an improved COVID-19 situation in the U.S.
Do the prospects of rising interest rates hurt Teladoc? At least somewhat. The company isn't profitable yet and relies on debt (including issuing convertible notes) to raise additional capital. Higher interest rates will mean that Teladoc's borrowing costs go up.
Now what
Teladoc's business could perform quite well this year regardless of what happens with COVID-19 or interest rates. The company has several new contracts in place. Its new Primary360 virtual primary care service is also gaining momentum.
