Despite its shares losing more than 67% of their value over the last 12 months, there are at least a few reasons to still be interested in buying Teladoc Health (TDOC -2.40%) stock. The telehealth company's continual investment in its platform continues to pay off, and it's definitely one of the leaders in the quickly evolving space.
But, it's understandable if investors are intimidated by its recent abysmal performance. Let's think about three reasons why there's still a bull case for Teladoc and then conclude by also entertaining a big reason to consider selling.
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1. Revenue per member is rising rapidly
The first reason that Teladoc might be worth buying is that it's making more income per subscriber than ever before.
Last year, each member in the U.S. brought in an average of $2.49 in revenue, an increase of 52% over 2020's average. That was made possible by members increasing their utilization of the company's telehealth services; its total number of visits increased by 38% year over year, reaching 15.3 million by the end of 2021.
New programs like its Primary360 primary care service are crucial when it comes to enticing existing subscribers to initiate more telehealth visits. Primary360 is aimed as an alternative to the in-person primary care experience, and members enrolled in it are 50% more likely to use another Teladoc service -- usually as a result of a referral from an affiliated practitioner, of course.
Moving forward, expect Primary360 to keep being a major driver of increasing revenue per member as the business adds support for more specialties and care integration schemes.
2. It's projecting good growth through at least 2024
Over the next few years, Teladoc probably won't wow investors as it did with its wild run-up in 2020 and 2021, but it's planning to deliver faster-than-average growth nonetheless, and that's another reason its shares could be worth picking up.
Management expects that the base of subscribers will grow modestly by up to 5% per year. But thanks to ongoing efforts to juice more cash from each person using the service, it also expects to be able to grow its revenue at a compound annual rate (CAGR) of at least 25% per year through 2024. That would leave it with more than $4 billion in inflows in 2024 compared to 2021's total revenue of just over $2 billion.
For reference, Teladoc's quarterly revenue expanded by 331% over the past three years, so these projections are reasonable and actually signify a reasonable deceleration of growth to reach what may be a more sustainable rate than the blastoff of the recent past.
3. Many consumers like using telehealth
In terms of industrywide tailwinds, Teladoc benefits immensely from consumers' tendencies to appreciate some of the benefits telehealth offers in contrast to traditional in-person healthcare visits.
Per research requisitioned by the company, 82% of people think telehealth is at least as good as in-person care options. And 60% of consumers are at least open to the possibility of a virtual healthcare plan, meaning that Teladoc's total addressable market is absolutely gargantuan.
Plus, both of those pieces of information bode well for the business's attempts to expand its offerings into medical specialties and chronic care management. Furthermore, as Teladoc finds new ways to integrate medical sensors into its telehealth services, its pitch to consumers will be more appealing.
But can it become profitable?
Despite these reasons to buy Teladoc stock, there is also one reason to sell it.
It isn't profitable, and it isn't clearly making sustained progress toward profitability over time. Its gross margin under generally accepted accounting principles (GAAP) was 67.2% in 2021, up from 63.1% in 2020 -- but 2020 was an especially rough outlier year, so the recovery isn't necessarily part of a larger positive trend.
Still, there's some evidence that things are improving. Its total quarterly expenses have fallen as a share of revenue over the last three years. And its quarterly free cash flow has grown by 52.3% in the last year, so the profitability situation is far from being dire.
But for investors who are more interested in stability than growth potential, a lack of near-term profitability might be a dealbreaker. For investors focused on growth, it's understandable why this stock might be intriguing to consider now.
