Once upon a time, Teladoc Health (TDOC -2.40%) ranked as one of the hottest stocks on the market. The COVID-19 shutdowns in 2020 created surging demand for the virtual care services that Teladoc provides.
But the fairy tale didn't end happily ever after. Teladoc Health's shares began to decline in early 2021. It's pretty much been a downhill ride for investors since then. In 2023, we've seen the telehealth stock soar more than 25% a couple of times only to give up all of its gains. Teladoc stock is currently down nearly 30% year to date.
At least one prominent investor views Teladoc's sell-off as a great opportunity, though. Cathie Wood has been buying this beaten-down stock hand over fist. Should you?
Several Ark Invest funds loading up on Teladoc
Wood has been a longtime fan of Teladoc Health. She first initiated a position in the stock way back in 2017 -- well before the COVID-19 pandemic brought Teladoc into the limelight.
In recent months, Wood appears to have renewed her interest in Teladoc. In September, four Ark Invest exchange-traded funds (ETFs) bought shares of the virtual care provider: Wood's flagship Ark Innovation ETF (ARKK 1.05%), Ark Fintech Innovation ETF (ARKF 1.97%), Ark Genomic Revolution ETF (ARKG 0.74%), and Ark Next Generation Internet ETF (ARKW 0.45%).
Wood didn't scoop up any additional shares of Teladoc Health in October. However, she has been back at it in November. Her Ark Innovation ETF and Ark Genomic Revolution ETF increased their positions in Teladoc over the last couple of weeks.
Thanks in part to these recent transactions, Teladoc Health now ranks as the seventh-largest holding for Wood's Ark Genomic Revolution ETF. It's the 16th-largest holding for both Ark Innovation ETF and Ark Next Generation Internet ETF. And Teladoc is No. 21 among Ark Fintech Innovation ETF's holdings.
Teladoc's pros and cons
Like any stock, Teladoc has its pros and cons. But with its share price down so much, let's start with the negative side of things.
Arguably the biggest knock against Teladoc Health is that it remains unprofitable. The company has been in business since 2002 but has never posted positive annual earnings. Teladoc even acknowledges in its 10-K filings that it "may never achieve or sustain profitability."
There's also the reality that virtual care hasn't taken off as much as many anticipated that it would. Teladoc's revenue is growing. However, the rate of that growth is much slower than it was a few years ago.
TDOC Revenue (TTM) data by YCharts
One of the main pluses of Teladoc Health is that its virtual care services provide significant value for patients and payers. Telehealth offers greater convenience and is more cost-effective than in-person care. Teladoc has also done a great job of introducing new products and services that benefit its customers, with its chronic care management program especially standing out.
While Teladoc isn't profitable, its bottom line is improving. The company's net loss for the first nine months of 2023 was $191.5 million. That's much better than the $9.85 billion loss recorded during the same period in 2022. Even factoring out the huge goodwill impairment charge of $9.63 billion in the prior-year period, Teladoc's bottom line moved in the right direction.
Teladoc's adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) increased 40% year over year to $213.7 million during the first nine months of 2023. Its adjusted gross margin improved as well.
Is Teladoc Health a great stock to buy?
I have owned a small position in Teladoc Health for several years. It's been one of the most disappointing stocks in my portfolio. I've held on to it, though, in the hopes that the company would be able to deliver on its potential. So far, that hasn't happened.
Teladoc still does have a lot of potential, in my view. However, I wouldn't buy additional shares of the virtual care leader at this point. I think that there are other stocks that offer much better risk-reward propositions -- including a few that Cathie Wood also likes.
