Five years ago, the COVID-19 pandemic had not begun to wreak havoc in the world yet. Teladoc (TDOC +1.83%), a telemedicine specialist, was a little-known but rising star in its niche. The company's prominence soared during the worst of the outbreak as it provided patients with the option of receiving some medical care from the comfort of their homes without risking coming in contact with COVID-19 patients.
Teladoc thrived during much of the pandemic, but the company's financial results and stock price fell drastically as it receded. Its shares are now below their pre-pandemic levels. Can Teladoc bounce back? Let's discuss how things could evolve for the company through the next half a decade.
Will Teladoc address its biggest issues?
During the early days of the pandemic, Teladoc's number of visits soared, leading to solid revenue growth. But it didn't last too long. The company's top-line growth rates have been unimpressive for the past three years. Further, Teladoc remains deeply unprofitable with sometimes very inconsistent bottom-line numbers.
TDOC Operating Revenue (Quarterly YoY Growth) data by YCharts
It incurred significant generally accepted accounting principles (GAAP) net losses two years ago due to an acquisition-related impairment charge. More recently, in the second quarter, it recorded another significant net loss due to another impairment charge related to future cash flow estimates for its BetterHelp therapy segment. For the company to get back in investors' good graces, it will have to address both issues. That's what Teladoc aims to do. The company recently underwent a leadership change, with the new CEO, Charles Divita, who took the helm in June.
Divita plans to focus on several aspects of the business, including improved product offerings and international growth. In the latter department, Teladoc is making some headway already. In the third quarter, the company's total revenue dropped by 3% year over year to $640.5 million. International revenue increased by 15% year over year to $104.3 million. That's about 16% of the company's revenue coming from outside the U.S.
If that percentage increases while international revenue growth remains high through 2029, it will positively impact overall top-line growth. So, Teladoc's international expansion efforts could be critical to its success in the coming years.
NYSE: TDOC
Key Data Points
Here is something else that will matter: expanded insurance coverage in the U.S. The company is looking to get more third-party payers on board with its product offerings. This initiative could have a massive impact if successful. People tend to be much more likely to buy any product or service if a third party is helping foot the bill. Teladoc's revenue growth could meaningfully improve in the next few years if it successfully expands insurance coverage in the U.S.
Of course, it will seek to follow the same blueprint internationally. Which way will Teladoc's bottom line move through the next five years? In the third quarter, the company improved on that front. Its net loss per share of $0.19 was better than the net loss per share of $0.35 reported in the year-ago period. Teladoc has also been engaged in cost-cutting efforts. It is on track to initiate cost savings of $43 million this year and $85 million in 2025.
If successful, the company would be close to profitability. And if its initiatives to boost revenue growth work, Teladoc could be profitable within the next few years.
Should you buy the stock?
Teladoc's ability to mount a comeback will depend on many things going its way. What if they don't? Things will continue in the next five years the way they have since 2022. Teladoc does have vast opportunities in telemedicine, but it also deals with plenty of competition in the telemedicine market. The company's BetterHelp segment, once its biggest growth driver, is now a deadweight on its top-line growth. BetterHelp revenue in Q3 declined by 10% year over year to $256.8 million.
Teladoc's ability to secure third-party coverage will depend on several factors, including the alternatives available to insurance companies (also known as competition). And while international growth could be promising, it might also come with significantly higher expenses, squeezing the bottom line. Things could go well for Teladoc in the next half a decade, but there are also significant risks associated with the company. Investors should seriously consider that before pulling the trigger, and I'd advise risk-averse investors to stay away.
