Teladoc Health (TDOC 2.46%) stock has been on a crazy ride the past few years, from a high of $308 in February of 2021 to a low of $21.60 this past February. The telehealth company specializes in providing medical advice to patients. And so far this year, its shares are up 3%.
The healthcare company has solid name recognition as an early mover in telehealth. It has potential as a long-term investment, but there are plenty of risks in buying its shares. Here are three things that smart investors know about Teladoc.
1. It has a strong first-mover advantage in telehealth
Teladoc is the world's largest virtual healthcare platform, and its name is synonymous with telehealth. Its stock took off during the COVID-19 pandemic, when in-person doctor visits weren't always available or practical. While Teladoc's total visits aren't rising as fast as they were during the height of the pandemic, virtual care is expected to increase because it's less expensive and often more customer-friendly.
According to a report by Grand View Research, the telehealth market is valued at $101 billion in 2023 and is expected to become a $455 billion market by 2030, showing a compound growth rate of 24% over that period. Plenty of other companies are attempting to take advantage of that market, including American Well and Doctor on Demand, but Teladoc is easily the biggest player in the pure-play telehealth space. Last year, the company had 18.5 million patient visits, up 15% from 2021 and up 75% from 2020.
Teladoc is looking to parlay that advantage in several areas, including branching out this year into weight-management support. It already provides weight-loss coaching as part of its Livongo segment, but now the company is looking into prescribing weight-loss drugs.
That could provide a huge opportunity. Thanks to the popularity and effectiveness of Wegovy, a Novo Nordisk drug that was recently approved by the Food and Drug Administration (FDA), and the likely approval of Eli Lilly therapy Mounjaro (tirzepatide) to treat obesity, the interest in weight-loss drugs has surged. According to Morgan Stanley research, $2.4 billion was spent on obesity treatments in 2022, and that figure is expected to rise to $54 billion by 2030.
2. The company has never been profitable
Teladoc has lost money every year since its initial public offering in 2015. This past year, it posted a record $13.6 billion in losses. The company has focused on an aggressive strategy of growth; it's spent big on acquisitions, research and development, and marketing. While it has increased revenue by 1,199% over the past decade, it has never turned a profitable quarter.
In the first quarter, the company reported revenue of $629.2 million, up 11% year over year. But it also lost $69.2 million, or $0.42 in earnings per share (EPS), compared to a loss of $6.7 billion, or an EPS loss of $41.58, in the same period last year. While that makes it seem like the company's getting closer to turning a profit, it doesn't expect to do so this year. It delivered guidance for another EPS loss in 2023 of between $1.70 and $1.25.
One way the company has achieved revenue growth is by buying up 12 other companies. In 2020, it spent $18.5 billion to buy Livongo Health, which focused on chronic-care management for patients with diabetes, hypertension, and other conditions. In 2018, Teladoc bought Advance Medical, which had a big presence in home healthcare in Latin America, Europe, and Asia, for $352 million. It also spent $440 million in 2017 to buy Best Doctors, a medical consultation company.
TDOC Revenue (Annual) data by YCharts.
3. Teladoc is weighed down by considerable debt
Based on its forward price-to-sales ratio of 1.5, the stock may seem to be inexpensive and a good potential long-term buy, but there's a big risk. The purchase of Livongo was a double whammy for Teladoc. It added to the company's debt, and it hasn't helped the company's bottom line that much.
As of March 31, Teladoc had $2.59 billion in total debt. That's 35 times greater than its earnings before interest, taxes, depreciation, and amortization (EBITDA). Debt that high makes the stock a lot riskier because it hurts the company's chances of becoming profitable anytime soon, with interest payments cutting into its cash position.
And the Livongo deal has been a disaster for Teladoc's bottom line. The company has posted impairment charges of more than $12 billion related to the deal over the past five quarters.
