It's been a wild ride for Teladoc (TDOC +2.58%) over the past three years. The company's shares initially soared at the pandemic's peak, but they have been southbound for more than a year now. The recent sell-off that particularly affected growth stocks made things worse for Teladoc.
Even so, there are some excellent reasons for those focused on the long game to consider investing in this healthcare stock. Let's look at two green flags for Teladoc's future.
1. The telehealth industry has a bright future
Teladoc is a leader in the telehealth industry. This market was booming at the peak of the pandemic, and it isn't hard to understand why. Non-coronavirus patients still needed to receive some medical care, such as basic consultations, prescriptions, and referrals. However, healthcare facilities were swamped with COVID-19 patients, and others wanted to avoid going into these facilities for fear of catching the virus.
With that said, telehealth isn't just some pandemic trend. The technology is here to stay and will only gain greater adoption in the coming years. That's, in part, because it confers benefits to patients.
Driving several miles to see a doctor is no longer necessary in many cases since people can receive these services from the comfort of their homes -- and often at any hour of the day and on any day of the week. Convenience is always a great selling point, and telemedicine is most undoubtedly convenient.
Image source: Getty Images.
According to some estimates, the telehealth industry will expand at a compound annual growth rate of 36.5% through 2028 and reach $787.4 billion by then. Maybe these numbers are a bit optimistic, but the industry certainly is on a growth trajectory. And as one of the more prominent players in this market, Teladoc is in an excellent position to benefit.
2. It is trading near its pre-pandemic levels
Teladoc's stock has fallen so much in the past year or so that its shares are currently trading near their pre-pandemic levels.
NYSE: TDOC
Key Data Points
Even if the company had risen too fast during the outbreak, Teladoc certainly looks better now than it did before COVID-19 hit. The outbreak accelerated the adoption of telehealth, and the company's total visits and top line soared. In 2021, Teladoc's revenue grew by 86% year over year (YOY) to roughly $2 billion. That's impressive, considering how active the company was in 2020. Teladoc's total visits in 2021 increased by 38% YOY to 15.4 million.
The company's average revenue per U.S. member has also been increasing consistently, going from $0.80 in the first quarter of 2020 to $2.49 in the fourth quarter of 2021. Teladoc remains unprofitable. The company reported a net loss per share of $2.73 in 2021 compared to a much worse net loss per share of $5.36 reported in 2020.
Overall, though, Teladoc looks better than it did a couple of years ago. The fact that the healthcare company has now fallen near its pre-pandemic levels could be an opportunity for investors.
A solid stock to buy
The red ink on the bottom line is certainly one reason to be skeptical about Teladoc. Unprofitable companies were hit hard in the recent sell-off. Also, the telehealth specialist is facing competition from other players, such as American Well. Tech giant Amazon could also become a strong competitor in this market. Even with these caveats, though, Teladoc looks like an attractive option.
First, the company expects its net loss to continue shrinking. For fiscal 2022, Teladoc projected it would report a net loss per share between $1.60 and $1.40. At this rate, Teladoc could become profitable by 2024. And while competition is a worry, in my view there is more than enough space in this market for multiple winners. Teladoc has already gained considerable name recognition, and the company boasts nearly 50% of Fortune 500 companies in its list of clients.
The company will likely continue to sign deals with healthcare providers and add new customers, including third-party payers and private companies looking to provide telehealth services to their employees. That'll help Teladoc remain one of the leaders in this market, and that's why the company's future looks bright.
