Is It Time to Give Teladoc Stock a Health Check?

Teladoc Stock Plunges On $3 Billion Impairment Charge in Q2 of 2022

Teladoc stock spiralled downwards as the company reported a $3 billion goodwill impairment charge in the second quarter of 2022.

Shares of health-tech company Teladoc (NYSE: TDOC) plummeted after it announced its Q2 results on July 27. Teladoc posted a worse-than-expected net loss in Q2, dragging the stock lower by a wide margin. Teladoc stock is trading almost 90% below all-time highs, burning massive investor wealth since the start of 2021. 

In the June quarter, Teladoc reported revenue of $592.38 million and an adjusted loss of $19.22 per share. Analysts forecast sales of $583.76 million and an adjusted loss of just $0.64 per share. 

While Teladoc beat analyst revenue estimates, it missed the earnings forecast significantly. The company attributed its loss per share to a non-cash goodwill impairment charge of $18.78 per share and stock-based compensation of $0.32 per share. 

A goodwill impairment charge is reported when a company overpays for an acquisition. In this case, Teladoc acquired Livongo for a staggering $18.5 billion in 2020 and has since written down close to $10 billion in goodwill impairment charges. In fact, Teladoc’s current market cap is below $7 billion. 

In Q3, Teladoc estimates revenue between $600 million and $620 million with an adjusted loss between $0.85 and $0.60 per share. Analysts estimated Teladoc to report revenue of $613.73 million with an adjusted loss of $0.55 per share. The earnings miss and higher-than-expected losses for Q3 have sent Teladoc stock spiraling downwards. 

Let’s see if Teladoc can stage a comeback in the latter half of 2022. 

Teladoc stock will remain vulnerable this year

A key reason for Teladoc’s underperformance over the last 18 months is the deceleration of its revenue growth. Sales rose from $553 million in 2019 to $1.09 billion in 2020. In addition, the Livongo acquisition enabled Teladoc to almost double sales to $2.03 billion in 2021. Now analysts expect the top line to expand by 19.7% to $2.43 billion in 2022 and by 20.3% to $2.93 billion in 2023. 

Another reason for Teladoc’s shabby reason is its losses. While the goodwill impairment is a non-cash charge, Teladoc’s operating losses have totaled $800 million in the last four years. Alternatively, it ended Q2 with $884 million in cash, providing the company with enough financial flexibility until its profit margins improve. 

Moreover, there are a few bright spots for Teladoc stock and investors. The company’s paid membership in the U.S. in the June quarter surged 9% to 56.6 million, which was higher than the 5% increase in Q1. Its total visits in Q2 rose 28% to 4.66 million, higher than its guidance between 4.4 million and 4.6 million visits. 

What next for TDOC stock and investors?

Teladoc stock is valued at 2.8x forward sales, which is not too expensive for a growth stock. But the company needs to report consistent profits soon for investor sentiment to improve. As shares of the telehealth company have fallen off a cliff, it might be attractive to contrarian investors. Right now, TDOC stock is trading at a discount of 50% compared to consensus price target estimates.

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