Teladoc Health (TDOC -4.93%) stood out as one of the huge winners in the early days of the COVID-19 pandemic. But those winning ways are long gone now. Teladoc's shares have plunged nearly 90% from the highs set in early 2021.
Some investors have thrown in the towel on the telemedicine stock. Others think that Teladoc could make a major comeback. Here are what Motley Fool contributors Keith Speights and Adria Cimino see as the bear and bull cases for Teladoc.
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The bull case
Keith Speights: I think the bull argument for Teladoc boils down to market opportunity, ability to capitalize on that opportunity, and valuation. The first is relatively easy to quantify. Teladoc estimates that its total addressable market in the U.S. alone could top $260 billion per year. The company also operates in other countries, so it actually has an even greater overall opportunity.
Teladoc is without question the best-positioned company to go after this market. It's already the virtual health leader, with more than 50% of the Fortune 500 in its client base. The company offers a broader array of products and capabilities than any rival. Despite some headwinds that should be only temporary, Teladoc is poised to deliver revenue growth in the ballpark of 20% this year.
With all of this in mind, Teladoc's market cap of $5.4 billion seems to be ridiculously cheap. Its shares trade at only 2.3 times trailing-12-month sales. Although the company isn't profitable yet, that's not unusual for a business in a market that's in its early stages. Teladoc should have plenty of room to run over the next decade and beyond.
The bear case
Adria Cimino: Investors have a few concerns about Teladoc, and that's been more than reflected in the company's stock price. One fear is competition. Teladoc faces fellow big players like Amwell. And competition from smaller private companies also is heating up. Teladoc says these smaller players are bidding up online advertising spots -- and they also are winning business by allowing the prescribing of controlled substances during telehealth visits. National health regulators temporarily are allowing this practice during the public health crisis. But Teladoc says it won't do this. Even though this situation is temporary, it still allows competitors to gain market share -- that they may end up keeping.
Another worry is the idea Teladoc's popularity may wane once the pandemic is over. Of course, Teladoc's revenue already was climbing prior to the crisis. And it continues to increase today. But those gains are a far cry from what we saw during the earlier stages of the pandemic. For example, in the first quarter of this year, revenue and visits grew 25% and 35%, respectively. In the third and fourth quarters of 2020, both rose in the triple digits. Today's double-digit growth is great. But here's the concern: Competition and the continued return to the routine of visits in a physical medical office will weigh on Teladoc's ability to keep up that double-digit growth over time.
And, finally, Teladoc's latest earnings report is prompting investors to wonder whether the company truly can make it to profitability. Teladoc's enormous goodwill impairment charge was a one-time thing that resulted from its acquisition of Livongo. But this could set the company back when it comes to reaching revenue and profitability goals. Teladoc has cut its forecasts for this year. It now expects revenue in the range of $2.4 billion and $2.5 billion. That's down from an earlier estimate of $2.55 billion to $2.65 billion. And it now predicts negative earnings before interest, taxes, depreciation, and amortization (EBITDA) instead of a figure in positive territory.
Different views, different investors
Teladoc remains both volatile and risky. Investors who are more cautious will probably prefer other alternatives. That's especially the case over the near term, with growth stocks likely to underperform. However, Teladoc's long-term prospects could be attractive to investors willing to take on more risk. This beaten-down stock just might return to its winning ways in the not-too-distant future.
