Teladoc Health (TDOC 0.32%) appeared to be on life support Thursday, after reporting results that were far worse than investors had anticipated. The stock had already declined roughly 70% over the past year, as the pandemic-related tailwinds faded and growth of the company's telehealth services slowed to a crawl.
Investors began to wonder if there was any way to resuscitate the digital healthcare specialist, after its first-quarter results drove the stock down by another 46%, now down 90% from its high reached early last year. That leaves investors with a quandary: Is it best to move on, or is there a glimmer of hope for Teladoc Health?
The $6.6 billion elephant in the room
The biggest contributor to Teladoc's stunning fall from grace was a noncash goodwill impairment charge of $6.6 billion. This dates back to the company's acquisition of Livongo in late 2020. Investors will recall that Livongo developed novel, app-based tools to help patients with chronic conditions -- like diabetes -- better manage their disease. By using cutting-edge artificial intelligence and algorithms to provide timely suggestions, patients were able to stay on track between doctor visits.
The rampant adoption of telemedicine fueled by the pandemic had driven the value of telehealth companies through the roof, and Livongo was no exception. Teladoc paid $18.5 billion to acquire the company, but the stunning collapse of high-growth stocks in recent months has weighed on the value of that investment, resulting in the impairment charge.
Another reason investors seemed to give up hope was Teladoc's lowered guidance for 2022. Just three months ago, the company forecast full-year revenue of $2.6 billion at the midpoint of its guidance, which it promptly lowered to $2.45 billion.
On the conference call to discuss the results, management said that marketing for its direct-to-consumer mental health service -- BetterHelp -- wasn't generating the results it had before, forcing the company to revise its strategy. It cited competition for ads as the culprit.
Given the staggering decline, it's easy to see why investors might lose faith. Yet Teladoc is still expected to grow revenue by roughly 20% at the midpoint of its guidance, while member visits are expected to climb 24%.
If management is being conservative with its forecast, Teladoc stock might just be a buy. Time will tell.