Is This Crushed Telehealth Stock Worth a Second Look?

Teladoc Health (TDOC 2.92%) rode the wave of pandemic stocks to new heights in 2020 on its promise to revolutionize patients' access to healthcare. Yet despite continuing to increase individual patient visits, the company is still losing money.

In this video clip from "The Rank," recorded on Feb. 14, Motley Fool contributors Matthew Frankel, CFP®, Jason Hall, and Tyler Crowe discuss Teladoc's rise and fall, its short-term hurdles, and whether or not this once high-flying healthcare company deserves a spot in your portfolio.

Matt Frankel: Teladoc is the leader in virtual healthcare services. They have partnerships with companies like CVS and Centene. They are No. 1, they are the best in virtual healthcare. Their progress has been phenomenal. Obviously in 2020, their business went absolutely crazy when you couldn't go to a hospital or couldn't go to a doctor's office unless you actually had COVID or had some essential procedure you needed. But that's what makes their recent numbers even all the more impressive. In the third quarter, which is the most recent we have data for their report until the 22nd of this month. Their revenue was up 81% year over year, 3.9 million individual visits during the quarter, that was up 37% year over year. But the company's still losing money.

Here's my concerns. The company is still losing money. Their loss widened to a little over $400 million through the first nine months of 2021. Pretty big loss. Not a clear path to profitability at this point. For me, it's unclear what's going to take them to the next level now that COVID is over. They're not a pure disruptor. In the sense that say a DocuSign is that took a process that was already flawed, made it better. Teladoc, it clearly provided a temporary solution to a lot of things. I can go visit my family doctor now, for example. I couldn't do that a year ago. My big question and my hesitance has been, what happens in a post-COVID world? But like I said that the third quarter numbers were on top of that initial COVID pops or they speak for themselves and at the new lower valuation. Right now they are trading for less than they spent on an acquisition last year. When they acquired Livongo. I think they actually spent more than the $11.7 billion market cap they have right now. I don't have the exact number for that acquisition in front of me. There are some other competitive threats. I see Tyler making a face, there's like, I can't wait till I chime in on this.

Tyler Crowe: No, I just hearing that they're worth less than an acquisition they made a year-ago [inaudible 00:06:26].

Frankel: To be fair I think the acquisition was in stock, so you could make the argument that it evens out. Amazon recently just launched its telemedicine services nationwide, which is another concern of mine when it comes to the stock. Like I said, at the new lower valuation, it seems like it might be worth a second look. Guys, we can start with Tyler on this one, I guess.

Crowe: I am not going to let, this may sound shocking to Matt, probably not shocking to Jason, but all three of the stocks that you mentioned, Upstart, Teladoc, and Shopify. I've never looked at them. I don't actually know a thing about them. I know that's weird. I know like they're popular stocks that they're just something I've ever looked. I probably own them as part of like a tracking. Like I do some service tracking in my portfolio, but other than that, they could be just pieces of paper. But my actual question, is a little bit more about generic investing and I think this could be a fun topic just to think about for a minute or two. Like you said, it's a company that's been losing money for a while and with a growth stock like this or something that has disruption potential, how much leash or when do you start looking at something like that and saying, OK, this loss-making, it's really it's starting to break thesis.

Frankel: One of my big things with Teladoc is first of all over 90% of the revenue's domestic. They still have a ton of international growth potential that I wanted. They obviously have to get a lot bigger to create a path to profitability. They have disruptive potential, but my big questions are one, how much healthcare can really be migrated online in a post COVID world? I don't care how capable my computer is. There are certain things I don't want to do in front of a webcam [laughs] that I'm willing to do in my doctor's office and I mean, that sounds silly, but it's true for a lot of people. My big question is, how much healthcare can be migrated online and how much of the disruption was already pulled forward because of COVID. So I know Jason likes this one, too.

Jason Hall: I do, and here's a caveat. Actually, I haven't said this on Fool Live or Backstage because honestly a lot of it's just timing. But I actually trimmed my Teladoc position about two weeks ago, 10 days somewhere around there. Just a very, very little bit. And part of it was because I had made some pretty substantial investments in the company along the way down. I still think telemedicine is going to be an order of magnitude bigger five years ago than it was on Dec. 31, 2019. The thesis was never about COVID and talked about that stock high when the price was so much higher when it closed the Livongo deal. There was just a tremendous amount of exuberance about the prospects for this industry, which is going to be huge, is that it's going to be absolutely enormous. That we're paying for a lot of future results. I want to say that and what's changed No. 1, I think it's we've seen Teladoc stock ride the same cloud services high-growth roller coaster down over the past year that so many other great stocks have done. I mean, Zoom's a wonderful business and its stock has come down enormously. CrowdStrike. I could throw 100 names out there and if it's a cloud services, software-as-a-service kind of business, it's gone through that same roller coaster.

For Teladoc with me, I think the things that concern me the most, I think it's going to continue to generate better numbers going forward. Like you were talking about in the third quarter more visits, more patients, all the metrics were better than they were the year before, which was like the peak of people using telehealth for the pandemic-related stuff. But you go back three or four years ago, the entire story is access to care and driving the cost out of care. You think about so many people in the U.S., they don't have access to a specialist. As we continue to get older, if you live somewhere in the Midwest, if you live in a rural area, the nearest specialist for cardiovascular things, the best access to cancer doctors, it might be four- or five-hour drive to get to a specialist. If you want to get a second opinion, you've got to drive five hours in the other direction. It's unfeasible. I think all of those things are there for Teladoc. From everything that I've seen, Teladoc continues to struggle with that integration of Livongo and what they're running into is very different corporate cultures from what I've heard. That's a real challenge and that's really important because Livongo and all of the tools for treating chronic illness and that thing are really important to Teladoc as an integrated platform. It's really, really important. And at the same time I mentioned Zoom. Zoom's looking to really get into healthcare. Microsoft is already in healthcare. There's a lot of really big competitors. It's going to be a big space and I think there's going to be a lot of winners. Six months ago, I would've put this like one or two on this list. I bumped it to five because I'm just not as convinced as I used to be it's going to be as big of a winner as I think it can. But it's still one, by cost basis, one of my larger investments.