Early in the pandemic, shares of Teladoc Health (TDOC -2.40%) surged amid the growing popularity of telehealth. But even though things have nearly returned to normal, demand for telehealth services remains strong. It looks set to remain a key part of the healthcare industry, helping patients stay on top of chronic conditions such as diabetes and hypertension.
The stock, unfortunately, has taken a beating over the past few years and hasn't even returned to its pre-pandemic levels. But with Teladoc recently reporting some encouraging earnings numbers, could the stock be overdue for a rally?
Teladoc's growth rate has been stabilizing
On April 26, Teladoc Health reported its earnings numbers for the period ended March 31. A big positive was that the business's growth rate remained resilient. Sales of $629 million were up 11% year over year. While that's not as strong as the figures achieved during the early stages of the pandemic, when the stock was a red-hot buy, the growth rate hasn't fallen into the negative. At double digits, it's still a positive trajectory.
TDOC Revenue (Quarterly YoY Growth) data by YCharts.
For the full year, the company is projecting revenue to reach between $2.575 billion and $2.675 billion. At the midpoint ($2.625 billion), that would be a 9% increase from the $2.4 billion Teladoc reported in 2022. I'm optimistic that the company could do even better.
A potential catalyst for the stock
One thing that jump-started Teladoc's stock just before the release of earnings was the news that it was launching provider-based care services for weight management and pre-diabetes. These are expansions of services that were already available for the company's hypertension and diabetes programs.
This comes as weight-loss drug Wegovy has been surging in popularity, and people have been taking Ozempic (which is approved for diabetes rather than for weight loss) due to a shortage. This year, there could even be another weight-loss treatment available: Mounjaro, which has also been highly effective in helping people lose weight.
By tapping into these opportunities, Teladoc could generate better-than-expected growth this year. That could go a long way toward improving its prospects for profitability which, up until recently, have looked dim due to impairment charges.
Are impairment charges (finally) in the past?
An important item that investors didn't see on Teladoc's recent earnings report was any goodwill impairment charge. In the same period last year, the company wrote down goodwill by $6.6 billion. For all of 2022, it incurred a whopping $13.4 billion in impairment charges as a result of paying far too much -- $18.5 billion -- for chronic care company Livongo Health in 2020.
Teladoc was simply paying a high price for the company at a time when valuations were out of control. But now, with Teladoc's goodwill totaling less than $1.1 billion, there's not much left to write down. That doesn't mean there won't be any more impairment charges, just that they should be far less significant. That's a positive for investors, because there's nothing like a big, unexpected expense to destroy a company's earnings numbers.
While Teladoc remains unprofitable, its bottom line is back to more normal levels. If it can achieve some strong growth this year, it can, we hope, get close to breaking even in the near future.
TDOC Net Income (Quarterly) data by YCharts.
Should you buy Teladoc Health stock today?
For long-term investors, Teladoc could be a great buy right now. What's striking is that despite the growth and apparent permanence of telehealth, shares of Teladoc Health are currently trading for less than they were before the pandemic began. At less than 2 times revenue, the stock isn't expensive.
With more growth on the horizon, weight management providing a potential catalyst, and no multibillion-dollar impairment charges hindering its bottom line this year, the company could be overdue for a much-needed rally.
Although I don't see the healthcare stock getting back to the highs it reached in 2021 anytime soon, there's plenty of room for shares of Teladoc Health to climb much higher from where they are right now.
