Mr. Market hasn't been very friendly to growth stocks as of late. Expectations for a series of interest rate hikes and concerns surrounding Russia's invasion of Ukraine have led investors to find shelter from speculative assets in more durable stocks.
As a result, high-growth names that aren't yet profitable have nose-dived in recent times. One of those companies, Teladoc Health (TDOC 1.27%), has been squashed in the past six months with its shares down 56% vs. the S&P 500's loss of 1%. The telehealth pioneer has been absolutely crushed since reporting record numbers during the pandemic.
I'm still a huge advocate of Teladoc's long-term commercial prospects, but there are several components that investors should ponder prior to buying a stake in the company. On that matter, let's discuss three key points all investors should know about Teladoc today.
Growth is unwinding
Teladoc had tremendous results in 2021. The company reported revenues of $2.03 billion, translating to a robust 85% increase year over year. Over a five-year span, the telehealth leader has expanded its top line at a compound annual growth rate (CAGR) of 75%. Total visits and average revenue per U.S. member enjoyed growth of 41% and 53% in the final quarter, climbing to 4.4 million and $2.49, respectively.
The company's past performance has been top-notch, but its future growth -- although still strong -- is projected to slow. Per management's guidance, analysts are modeling Teladoc's top line to reach $2.58 billion in 2022, equal to 27% growth year over year. This still indicates substantial development; however, it's notably lower than growth a year ago. Likewise, management is only guiding for 54 million to 56 million U.S. paid members by the year's end, representing only 1% to 5% growth from Teladoc's 53.6 million members to close out 2021.
I'm not trying to act like the company's future will be filled with disappointment, but it's important for investors to understand that we shouldn't expect the same levels of growth moving forward.
Competition is fierce
The global telehealth market is forecast to expand at a CAGR of 19% through 2030, up to a walloping $225 billion. A market of that capacity is sure to attract the attention of many participants, which is exactly what is unfolding before our very eyes. Traditional healthcare providers like UnitedHealth Group (UNH -0.23%) and Cigna Corp (CI 0.17%) continue to penetrate the telehealth arena as more consumers show interest in the convenience and comfort of at-home medical appointments.
Even big tech is in the mix -- Amazon (AMZN 1.63%) is currently rolling out its telehealth service, dubbed Amazon Care, across 20 of the largest cities in America. The tech titan's involvement has left many investors spooked that Teladoc won't be able to stay afloat in the long run. While I'd argue that the industry is large enough to support several secular winners, it would be unwise to ignore the competition that challenges Teladoc now and in the future.
Teladoc isn't profitable yet
Teladoc's business has made great strides throughout the past few years, but the company has yet to achieve a positive bottom line. Teladoc reported a net loss of $2.73 per share in 2021, and investors shouldn't expect profitability this upcoming year, either. Management is forecasting a net loss of $1.60 to $1.40 per share in 2022. In fact, analysts aren't projecting a positive bottom line until 2025 -- and even then, all stars will have to align perfectly for that to be the case. As the industry becomes increasingly crowded, competition could eat away at Teladoc's margins and prevent the company from becoming profitable in the long run.
Teladoc is still a buy in my mind
All things considered, I think Teladoc is still a great long-term buying opportunity. The company is trading at 4.9 times sales today, which is significantly lower than its five-year average price-to-sales multiple of 14.1. And sure, competition poses a threat to Teladoc's margins and chances of achieving profitability, but the industry is vast enough to sustain a number of success stories.
We're witnessing a paradigm shift toward virtual medicine, and given Teladoc's reputation as a founding father, I feel comfortable that it will flourish in time.