Teladoc Health (TDOC +4.06%) has been showing signs of life lately. The telehealth company has struggled to win over investors in recent years after incurring billions in impairment charges and repeatedly posting deeply unprofitable quarters. But recently, amid hopes of interest rate cuts, investors have been warming up to the stock again. Teladoc's shares have risen 18% over the past three months.
Has the tide turned for Teladoc, and is this the start of a much bigger rally for the stock -- or is it destined to remain a bad buy?
NYSE: TDOC
Key Data Points
Teladoc's financials have been showing progress
A big problem for Teladoc was that it overpaid badly for chronic care company Livongo in 2020. It shelled out $18.5 billion for the business in an effort to expand its capabilities. But at the time, valuations were skyrocketing in the markets. Ultimately, Teladoc would go on to incur billions in impairment charges as it wrote down goodwill to adjust for that hefty price tag. In 2022, the company incurred a net loss of $13.7 billion, largely due to goodwill impairment costs of $13.4 billion.
The good news is that during the first nine months of 2023, impairment hasn't been weighing down its results anymore. Revenue of $1.9 billion has risen by just under 10%. And Teladoc's net loss during that time frame has totaled $191.5 million -- a far cry from the $9.8 billion loss it incurred over the same period a year earlier. The company expects to finish 2023 with $2.6 billion in annual revenue, which would be an 8% increase from the $2.4 billion it reported in 2022.
The results could be better, but what's encouraging is that the business is moving in the right direction. And as it chugs along and quietly posts better results, that could potentially lure investors back into the stock, as there is a lot of potential within telehealth in the long run.
Telehealth still promises to be a big industry within healthcare
Telehealth and virtual care took off in popularity during the early stages of the pandemic. Teladoc's stock benefited from that excitement because it was (and still is) one of the big telehealth providers in the world. But as things have returned to normal, investors have been less bullish on the industry and Teladoc in general.
But the telehealth industry is a fast-growing one, and it's flush with opportunities. Analysts from Grand View Research project that by 2030, the telehealth market will be worth a staggering $455.3 billion, which is more than 3 times the $123.3 billion they estimate it will be worth this year, growing at a compound annual growth rate of 24.3%.
Telehealth makes it easy for patients to stay on top of chronic conditions, such as diabetes and hypertension. By being able to access care via phone or computer, patients can easily check in without having to physically go see a doctor. Plus, as the population grows, and it becomes more difficult for patients to access a doctor, telehealth offers more flexibility in receiving primary care.
While telehealth may have seemed like just a pandemic-related trend, it remains a promising growth opportunity that investors shouldn't overlook.
Is Teladoc Health stock a buy today?
Teladoc Health could be a big winner if interest rates come down this year. Lower rates can make it easier for companies to expand their businesses, plus it could entice investors to buy growth stocks rather than stay invested in bonds.
A major part of Teladoc's appeal in the long run is that telehealth has so much potential. And with the company being a big name in the industry, it could stand to benefit from its long-term growth.
According to the consensus analyst price target of just under $27, there's room for the stock to rally another 22% from where it is now. But that's just in the short term; in the long run, Teladoc Health could have even more upside.
For investors who are willing to buy and hold, Teladoc makes for a promising investment. This recent rally could be the start of a much bigger one now that the beaten-down shares may finally get onto growth investors' radar again. Teladoc has been a forgotten stock, but it has the potential to deliver some great returns if you're willing to be patient.
