Telemedicine was thrust to the mainstream during the COVID-19 pandemic. Once just a convenience, it became the only way many patients could visit a doctor for a while. That was a boon for the companies providing those services.

But as the healthcare landscape has returned to normal, growth has stalled. The stocks have been crushed. None is more prominent than poster child Teladoc Health (TDOC -4.64%). After peaking near $300 per share, the stock now sits near a 52-week low of about $26. The question shareholders are asking now is: Will it get better from here?

Predicting a pop

If management's guidance is any indication, the company could be about to turn things around. Despite headwinds from BetterHelp -- its direct-to-consumer mental health service -- adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) came in ahead of expectations in the second quarter. The company's robust forecast for the remainder of the year left many analysts scratching their heads. 

Management forecast a weak third quarter but reiterated guidance for the full year. Doing the math, that would require the fourth quarter to deliver twice as much adjusted EBITDA as the third quarter.  The embedded assumption is that advertising spending can be cut without a substantial impact to revenue. Analysts are understandably skeptical.

Chart showing Teladoc's projected fourth quarter EBITDA far exceeding recent quarters.

Data source: Teladoc Health. Chart by Author.

Not enough growth and too many expenses

The company's 2020 acquisition of Livongo -- a chronic care solutions provider -- was supposed to fuel growth. It was growing more than 125% annually and brought in $75 per member per month compared to the roughly $2 Teladoc brought in. But management has written off about half of the $18.5 billion purchase price. And the combined company -- which was expected to grow between 30% and 40% annually for the next few years -- is expected to post only 3% growth in the quarter being reported today. That's not enough for a money-losing company when expenses are climbing at the same rate. Sales growth without increasing expenses is what transforms fast-growing money losers into profit machines. That's not happening at Teladoc.

TDOC Total Operating Expenses (TTM) Chart

TDOC Total Operating Expenses (TTM) data by YCharts

It's not all bad news. Chronic care members are up. And that's driven operational metrics like revenue per member and utilization up significantly. And nearly one-third of chronic care members use more than one program. That's important. Because the more services members like those with diabetes take advantage of the better they fare. And those better health outcomes are the key to Teladoc winning contracts with new customers.

The clock is ticking

With losses mounting and margins headed in the wrong direction, the company may be approaching a moment of truth. Management has a vision of wrap-around care for patients from primary care and chronic care management to in-home lab testing and delivery of medications. It has invested a lot in tying that suite of services together in one platform. But every chapter of the story has been about revenue growth -- not profit. And rapidly rising interest rates have slammed that book shut. It's time for the company to show it can move more of those dollars to the bottom line. Maintaining -- and then meeting -- its current fourth quarter guidance would be a great first step. If it can't, I expect the pain to continue for shareholders.