Teladoc Health's (TDOC -1.52%) business and share price soared in the earlier days of the pandemic. That's as patients opted for virtual medical visits over in-person contact. These days, Teladoc's business continues to grow. But many investors have lost confidence in this telehealth leader.
Investors worry Teladoc may struggle to reach profitability -- and that its best days may be in the past. Since the start of the year, Teladoc shares have dropped more than 60%. This picture may look dim. But that's only if we take a short-term view. If we take a long-term view, buying this beaten-down stock now could be just the right move. Here's why...
Recent bad news
First, let's go into a bit more detail about why some investors have turned their backs on Teladoc. The company has delivered some bad news in recent months. It recorded two billion-dollar non-cash goodwill impairment charges. This implies Teladoc paid too much when it bought chronic care specialist Livongo back in 2020.
Teladoc also is facing some headwinds this year. The process of signing new chronic care deals has slowed. One big reason for that is the economic uncertainty, the company said. And that's resulted in employers taking longer to make decisions about health plans for their employees.
Teladoc's mental health service -- BetterHelp -- saw growth come in at the lower end of expectations in the most recent quarter. That's due to consumers' worries about the general economy. Smaller rivals fighting for market share also weighed on BetterHelp.
Finally, investors worry all of these elements may make it difficult for Teladoc to reach profitability any time soon. The company's goodwill impairment charges, stock-based compensation expenses, and amortization of acquired intangibles led to a net loss of $60.72 per share in the first half of the year. That's compared to a net loss of $2.16 per share a year ago.
Now, let's look at the brighter, long-term angle. Teladoc's revenue and visits are growing in the double digits. And the company has continued to increase two key figures along the way: the number of U.S. paid members and average revenue per member.
A market leader
Teladoc is a leading player in the telehealth market. The company serves more than half of Fortune 500 companies. And in spite of a slowdown in signing new chronic care deals, Teladoc's pipeline is looking strong. The company says it has double the number of multimillion-dollar deals in the pipeline compared to the same time last year.
Teladoc's Primary360 primary care service is in the early stages of adoption -- but things look promising. The company is working with one of its bigger health plan partners to roll out Primary360 to even more of that plan's members.
As for the general market, things are looking positive too. It's clear telehealth wasn't just a trend during the earliest days of the pandemic. Growth is set to continue, according to an Arizton research report. Telehealth general consultation is forecast to grow at a compound annual growth rate (CAGR) of more than 26% through 2027, the data show. And behavioral health is set to grow at a CAGR of more than 28%.
Should you buy now?
A decision to buy Teladoc shares today or not depends on your comfort with risk. Right now, the shares trade at only 2.1 times sales. That's compared to about 7 earlier this year. This looks dirt cheap. Still, considering economic headwinds and the financial impact of recent impairment charges, Teladoc's recovery may take some time. That's why cautious investors may want to monitor upcoming earnings reports before buying the shares.
But, for investors with a bit more risk tolerance, getting in on this story today would be a genius move. Teladoc operates in a high-growth market. The company already has a position of strength and continues to grow revenue and visits. So, a few years down the road this may equal major rewards for the company -- and investors.
