Telemedicine specialist Teladoc (TDOC 2.46%) has had a rough go of it in the past year. The company's shares have plunged by 79% in the trailing 12-month period. While marketwide issues (inflation, geopolitical tensions, etc.) have undoubtedly played a role, Teladoc faces headwinds of its own. On the other hand, there are still solid reasons to consider purchasing shares of this struggling healthcare stock.
Let's look at one reason to be bullish on Teladoc stock and one reason investors might want to look elsewhere.
Reason to buy: Telemedicine has a bright future
Some unapologetic Teladoc enthusiasts believe that the future of the telemedicine industry is an important reason to consider getting in on Teladoc. While estimates vary (as they always do), some analysts project that the telehealth market will expand at a compound annual growth rate of 15.8% through 2027.
Highly specific figures aside, the point is that this market -- which gained considerable traction amid the coronavirus outbreak -- isn't just some pandemic trend. In fact, there are excellent reasons to think telemedicine will continue on its upward trajectory beyond those years we can reasonably forecast. Convenience is always a great selling point, and having consultations with physicians from the comfort of one's home is the height of convenience.
Here's another great selling point: cost savings. One study found that patients save between $19 and $121 per telehealth visit. Taken together, these facts paint a clear picture: telehealth is here to stay. Teladoc is one of the leaders in the field. Of course, that doesn't mean it will remain so. But the company has already gained considerable name recognition, not to mention plenty of customers.
Teladoc ended the first quarter with 54.3 million U.S. paying memberships -- 5% higher than the comparable period of the previous fiscal year. The company's total visits grew 35% year over year to 4.5 million during the quarter. By comparison, American Well, one of Teladoc's main competitors, had 1.8 million visits during the first quarter, representing a 20% year-over-year increase. At the very least, Teladoc seems to be in a good position in this industry ripe for growth, and that's good news for the future of the company.
Reason to sell: Worsening net losses
As a counter-argument, Teladoc remains unprofitable. That's bad enough in today's tricky environment. With the market experiencing heightened volatility, inflation, and rising interest rates, investors would rather put their money in companies that are already consistently profitable. To make matters worse, though, Teladoc's bottom line widened substantially during the first quarter.
The company's net loss came in at a whopping $6.7 billion, much worse than the net loss of $199.6 million reported during the first quarter of 2021. Teladoc's revenue for the quarter jumped by 25% year over year to $565.4 million. In fairness, Teladoc's net loss was due to a $6.6 billion impairment charge it incurred in connection with its 2020 takeover of behavioral health specialist Livongo Health.
This impairment charge tells us that Teladoc overpaid for this acquisition, which is not good. On the bright side, we are unlikely to see another Livongo Health acquisition-related impairment charge of this magnitude on Teladoc's financial statements. Still, the market did not respond well to Teladoc's bottom line, and many investors got rid of their shares, sending the stock tumbling down.
Is the sell-off overdone?
While Teladoc's bottom line woes are a worry, it's worth mentioning that the company's shares are now near their pre-pandemic levels. That's odd considering how much headway Teladoc has made in the past couple of years. For instance, the company recorded revenue of $553.3 million in 2019; that's for that entire fiscal year, and it is slightly less than the top line Teladoc reported during the first quarter of 2022 alone.
The company ended 2019 with 36.7 million U.S. paid memberships, much lower than its most recent total. True, the telemedicine giant's net loss of $98.9 million in 2019 was also much lower. Still, Teladoc's revenue will only continue to grow as it makes headway in the vast and expanding telehealth market.
In my view, the company is worth a lot more today than it was in 2019, making its current share price a bargain. That's why I think Teladoc's stock is a buy today.
