Teladoc Health (TDOC +0.71%) was a rock star during the early days of the pandemic. It quickly became a stock market darling as its revenue soared due to the telemedicine services it provided. However, Teladoc was unable to maintain that pace, and the past few years have been horrendous for the stock. The stock is down nearly 92% over the past six years.
Here's the even worse news: Teladoc Health is unlikely to bounce back anytime soon, so investors should stay away from the stock. Here are three reasons why.
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1. Stiff competition
The success Teladoc saw during the early days of the pandemic attracted significant competition. There are now many alternative platforms, including some created by well-established, highly successful corporations like Amazon. The tech giant's strong brand name and its ecosystem of more than 180 million Prime members in the U.S. is helping power its ambitions in the healthcare industry.
Further, Amazon isn't the only company leveraging these advantages in the battle for telemedicine services. Some insurance companies with large existing client bases can bypass third-party virtual care platforms and create their own similar ones. All of these dynamics pose a significant threat to Teladoc's prospects. True, a company can be successful despite significant competition, but that's only one of Teladoc's many problems.
2. A growth driver no longer
One of Teladoc's most important growth drivers was its virtual mental health therapy service, BetterHelp. However, this segment has been struggling in recent years, largely due to competition. BetterHelp is now a deadweight on Teladoc's top-line growth while it continues to lose paying members. This suggests that, although it's possible to succeed in a sea of competitors, Teladoc has yet to fully grasp how to achieve this.
NYSE: TDOC
Key Data Points
3. Consistent net losses
Teladoc is not yet a profitable company. That alone wouldn't necessarily be a good reason to avoid the stock. Many corporations are attractive despite showing a loss on the bottom line. However, these tend to be businesses that record strong revenue growth and are establishing themselves as leaders in industries with massive room to grow. That description does not fit Teladoc.
Sales growth has been slow -- at best -- and at times nonexistent, for a few years now, and the company has been losing market share. Now, the company has tried to turn things around and it hopes that its international expansion efforts will help it bounce back. And in fairness, international revenue has been growing faster for Teladoc.
But can it maintain that momentum? My view is that Teladoc is likely to encounter the same problems abroad as it did in the U.S, eventually. That's why it's not worth investing in the stock today.
