Can Teladoc's stock rediscover its pandemic-fuelled highs?

Teladoc [TDOC] stock has been on a downtrend spiral for most of 2021, sliding from a February high north of $300 to around $150, before the slump gathered momentum last month, slipping below the $100 level. 

The leading global provider of technology for telehealth, Teladoc’s virtual healthcare platform benefited hugely from the pandemic, but as Covid-19 restrictions eased and normality was at least partially restored, its popularity has diminished as fewer people sought remote medical advice.

Unsurprisingly, the company’s growth is expected to slow significantly for 2022. However, there are plenty of bullish analysts out there, while ARK Invest founder Cathie Wood is clearly keen on Teladoc stock. In addition, research firms and consultancies (such as McKinsey) believe that virtual healthcare is an emerging industry, and could be a major market within a few years.

So, is this a dip investors should buy before Teladoc’s shares rocket, or is the slide set to continue? And what’s the longer-term outlook for virtual healthcare, and Teladoc’s share price?

What’s happening with Teladoc stock?

Teladoc’s stock is down 52.76% so far this year, and has plunged 69.23% from its 16 February 52-week high of $308, closing out Monday at $94.78 (up 2.54% on the day). The stock has fallen 35.19% over the last month alone.

Despite – or perhaps because of – the sharp share price slide, ARK Invest founder and CEO, Cathie Wood, has been buying into Teladoc stock, acquiring over 415,000 shares on 18 November for four of its ETFs, reports 247wallstreet.com. In fact, Teladoc is the largest holding in the ARK Genomic ETF [ARKG], with a 7.54% weighting, and the second largest in the ARK Innovation ETF [ARKK], with a 5.91% weighting, behind only Tesla [TSLA], as at Monday 6 December.

Lack of profitability casts shadow

Teladoc has yet to record a profit, despite revenue soaring 97% in its 2020 financial year to $1.1bn thanks to the pandemic. The virtual healthcare leader posted a $418m operating loss, which has increased to $603m in 2021, on $1.9bn in revenue, reports nasdaq.com.

So, is virtual healthcare a scalable business model? Teladoc invested heavily on marketing in 2020, reports nasdaq.com, so the hope among management is that it can attract more users and achieve profitability in the coming years.

Can virtual healthcare and Teladoc thrive post-pandemic?

Virtual healthcare is here to stay due to a number of important factors, according to Bradley Guichard at TipRanks, who cites the overarching benefits of convenience, health considerations and cost savings, all of which should appeal to both patients and healthcare providers. Despite this, Guichard believes Teladoc’s stock valuation “is still quite high” and it’s likely that “the stock still has further to drop, given the heavy downward momentum”.

“the stock still has further to drop, given the heavy downward momentum” - TipRanks' Bradley Guichard

Global consulting firm McKinsey & Company estimates that the US virtual care market could be worth as much as $250bn, with telehealth continuing to enjoy increased adoption. The international market is also likely to present opportunities, predicts the Motley Fool’s Keith Speights.

In short, the virtual care market is still in its infancy and has huge growth prospects, and armed with the industry’s widest offering of products and services, Teladoc may be putting the blocks in place for success over the long term, reckons Speights. These factors bode well for Teladoc’s stock, while the company's customer base already includes more than half of Fortune 500 companies.

What’s next for Teladoc’s share price?

Teladoc stock has received a flurry of broker downgrades recently, from the likes of Citigroup, Wells Fargo, and Credit Suisse, reports Motley Fool. Canaccord Genuity analyst Richard Close also cut his price target, from $188 to $160, but has kept his ‘buy’ rating, with the reduced price target still 68.81% above Monday’s $94.78 close.

Last month’s Teladoc investor day was “actually quite encouraging, except for its 2021 revenue forecast”, said Motley Fool’s Eric Volkman, after it missed analysts’ projections. Volkman reckons the recent broker downgrades are an overreaction, and argues that Teladoc still has “anticipated top-line growth of at least 55% between 2022 and 2024”. He also points out that, despite the wave of price target cuts, almost all those analysts have maintained a ‘buy’ recommendation.

The average price target on Teladoc’s stock is $162.00, according to CNN, which represents a potential upside of 70.92% based on Monday’s closing level. And with 15 ‘buy’, two ‘outperform’, 12 ‘hold’, and one ‘sell’ recommendation, the consensus among 30 investment analysts with CNN is a moderate ‘buy’.

It’s pretty evident that despite the downward trajectory of Teladoc’s shares in 2021, there’s still significant potential for the stock specifically and the wider telehealth industry itself, as we head into 2022 and beyond.