Teladoc Health (TDOC -1.32%) will have its fourth-quarter earnings call on Feb. 22. And how it does to finish the fiscal year could go a long way in determining whether the struggling stock turns things around or if its shares continue to fall even further. In the past year, Teladoc's stock has plummeted 75% while the S&P 500 has produced gains of around 13%.
There are three numbers that investors will want to look at when Teladoc reports its earnings, which will help assess whether the healthcare company had a good or bad quarter. How it performs on these three metrics could make or break the stock in the weeks and months ahead.
Image source: Getty Images.
1. Visits
The number of virtual visits that the company records during the period will be crucial. In the third quarter ending Sept. 30, 2021, the company's visits topped 3.9 million. This was impressive, given that the outlook for the economy was looking strong and COVID-19 was becoming less of a concern (this was still prior to omicron), but yet, virtual visits rose from the 3.5 million visits that the company reported a quarter earlier.
Now, given that this upcoming quarter will cover the last three months of 2021 and include the impact of omicron, Teladoc should be due for a stellar performance. The chart shows historical visit data by quarter. For Q4, it was already projecting between 3.9 million and 4.1 million visits. If telehealth really is the go-to option for patients worried about COVID-19, the company should blow past those numbers. And if not, it could be a sign that perhaps that isn't the case, or that competition may be too fierce. American Well, Cigna (through its acquisition of MDLive), and CVS Health are just a few companies that provide competing telehealth services.
Data source: Company filings. Chart by author.
2. Paid memberships
A more troubling area of late for Teladoc has been its number of U.S. paid memberships. Although the number of visits has been increasing, there hasn't been any considerable growth in its membership numbers over the past several quarters, as the chart shows.
Data source: Company filings. Chart by author.
Teladoc itself considers member numbers an important key performance indicator, as this metric not only results in more revenue and more people using the service but also indicates the rate of adoption of the service. Without more evident growth from the company here, investors may be concerned about competition and Teladoc's ability to sign new members onto its platform.
3. Net losses
How Teladoc performs on the previous two items will likely impact its bottom line. Although revenue has been rising in particular since the acquisition of Livongo Health (the transaction closed on Oct. 30, 2020 -- that means Q4 2020 was the first quarter that its results were included in Teladoc's numbers), the company's bottom line has been deep in the red, as the chart shows.
Data source: Company filings. Chart by author. Revenue and Net Losses in thousands.
In recent quarters, the net loss has been shrinking, and investors will certainly be looking for that number to continue to come down. However, it may not be by much, as Teladoc forecasted a per-share net loss between -$0.73 and -$0.53 for this coming quarter. In Q3, its net loss was -$0.53. But if the company gets an uptick in visits and sales, as investors might expect given the emergence of omicron, the bottom line should also look a bit stronger.
Is Teladoc a buy heading into earnings?
Teladoc's shares are at the levels they were back in the fall of 2019 -- before COVID-19 and the subsequent rise in the popularity of telehealth. Teladoc's business is undoubtedly more promising now as more digitization takes place. According to a survey (which took place in June 2021) conducted by the Business Group on Health, since the beginning of the pandemic, 76% of employers "accelerated telehealth and virtual health offerings since the start of the pandemic, and plan to maintain these options."
The industry is in a much stronger position than it was in late 2019. Teladoc is also larger, with the inclusion of chronic care company Livongo now a part of its business. These are a few of the main reasons why I see stronger results from Teladoc in the future and why the stock's massive crash over the past year looks to be an overly bearish reaction to rising net losses and just a generally negative outlook for the telehealth sector. (Amwell, for example, crashed 87% over the same time frame.)
Teladoc's stock could prove to be a bargain buy, as its price-to-sales ratio of under 6 is the lowest it has been in years. And with more sales growth on the horizon, it may only be a matter of when, not if, the stock begins to rally again.
