Earnings season is upon us. Although this time can always be volatile, the stakes are even higher when the stock market is experiencing a downturn and the economy isn't doing well. That's especially true for those companies that have lagged the market mainly because of company-specific issues.
Let's look at two examples: Teladoc (TDOC -0.07%) and Pinterest (PINS -0.52%). Here's what's at stake for these businesses when they release their next quarterly updates.
1. Teladoc
Teladoc's results in the first quarter weren't that bad. The company's revenue grew by 25% year over year to $565.4 million. The telemedicine specialist also reported an increase in total visits, up by 35% year over year to 4.5 million. Other key metrics, including average U.S. revenue per member and U.S. paid memberships, rose. But investors couldn't overlook Teladoc's awful bottom line.
The company reported a net loss of $6.7 billion, although $6.6 billion of that was due to an impairment charge related to its 2020 acquisition of Livongo Health. That wasn't the only problem for Teladoc during the first quarter, though. Teladoc lowered its guidance for the current fiscal year. It had initially projected that it would record revenue between $2.55 billion and $2.65 billion.
Now, it expects revenue between $2.4 billion and $2.5 billion. One reason behind this change is that Teladoc is facing increased competition in the market for mental health services, especially from smaller companies that are pouring money into customer acquisition strategies that are, in Teladoc's view, unlikely to be successful in the long run.
When Teladoc reports its second-quarter earnings (on July 27), it will be interesting to check the trajectory of the company's bottom line and whether it is making progress in behavioral health, an important segment for the telemedicine specialist.
The market will not appreciate more serious missteps on the bottom line of the sort Teladoc made in the first quarter; red ink of that magnitude will almost certainly result in yet another bloodbath, especially since its top-line growth rates are now lower than they were at the pandemic's peak. Where does that leave investors? That depends on each person's investment horizon.
Even if Teladoc manages to improve on the issues it faced during the first quarter, the current state of the market is too unpredictable. But for long-term investors, Teladoc will be even more of a buy if its shares sink after its second-quarter earnings. Telemedicine is on the rise, and Teladoc is looking to become a one-stop shop for as many telemedicine services as possible.
The company's network of physicians offers basic consultations and referrals, and it boasts dozens of specialists across many different sub-disciplines. That's why its member count keeps on growing. And the fact that its average U.S. revenue per paid member is northbound shows that Teladoc is finding ways to monetize its existing U.S. client base (including enrolling these members into more of its services).
All of this bodes well for Teladoc's future, and as it remains one of the leaders in telemedicine, it's far too early to give up on the company despite its recent struggles.
2. Pinterest
Investors started giving up on Pinterest after the company's monthly active users (MAUs) peaked. That happened in the first quarter of 2021, and since then, Pinterest's MAUs have been on the decline on a year-over-year basis. However, during the first quarter, Pinterest managed to increase its MAUs on a sequential basis, the first time it had done so since Q1 2021.
Pinterest recorded 433 million MAUs in the first quarter, down by 9% year over year, but up by 2 million compared to the fourth quarter of 2021. The social media platform's revenue rose 18% year over year to $574.9 million during the quarter, largely due to its average revenue per user (ARPU) jumping by 28% year over year to $1.33.
Pinterest will have to do a few things during the second quarter to impress the market. A sequential -- or perhaps even a year-over-year -- increase in MAUs will be extremely helpful, and it will be interesting to see whether it can continue to increase its ARPU as well. If it fails to do either (or both) of these things, expect its shares to fall.
Although it is facing a host of near-term issues, Pinterest is in the same boat as Teladoc, at least in my view. Pandemic-related dynamics are distorting the company's user metrics. People flocked to social media platforms during the outbreak, but things changed once economies reopened. But zooming out helps.
And looking at Pinterest's MAU growth over the past few years -- instead of just the past year and a half -- reveals a pretty steady growth trajectory. Pinterest still has plenty of potential to grow its user base worldwide once pandemic-related dynamics subside. Growing its ARPU and taking advantage of attractive opportunities -- including e-commerce -- could be instrumental to the company's future.
It's also worth noting that Pinterest made news on July 14 after the private management firm Elliott Management acquired a 9% stake in the company. Pinterest's shares soared as a result, perhaps in anticipation of Elliot Management using its newly acquired status as Pinterest's largest shareholder to make some positive changes within the company.
But in my view, this changes little as far as Pinterest's long-term prospects are concerned, as those are the Street's potential reactions to the company's second-quarter results. It's worth it for investors to stick with this tech stock regardless of these short-term drivers.
