Teladoc (NYSE: TDOC) stock has cratered by over 46% and counting in pre-market trading today following a disastrous first-quarter earnings call. The New York-based telehealth company reported larger than expected losses for the opening period of 2022, with a $6.6 billion non-cash goodwill impairment charge being blamed as the main culprit.
Let's take a closer look at some of the details. Teladoc shareholders might want to brace themselves...
Teladoc reported an adjusted loss per share of $41.58 against analyst expectations of a loss of only $0.55, on revenue of $565.4 million versus an anticipated $568.9 million. In total, the company lost $6.67 billion throughout the course of the first quarter.
This was largely driven by a non-cash goodwill impairment charge, something that companies often record on their balance sheets when an asset has lost all inherent value. Teladoc declined to disclose exactly what incurred this charge, but much of the goodwill attributed to the firm was a result of the 2020 acquisition of digital health management platform Livongo for $18.5 billion.
It wasn't all bad news though, as revenue did increase by 25% year-over-year. This, however, is unlikely to give the company or its shareholders any major respite as its stock continues to tumble. Teladoc was already down over 40% year-to-date before today's cataclysmic drop and is a long way off highs seen during the COVID-19 pandemic.
One major reason behind the current sell-off could be the revisions made to Teladoc's guidance for the rest of 2022. CEO Jason Gorevic explained that,
"While we continue to see sustainable growth across our suite of products and services, we are revising our 2022 outlook to reflect dynamics we are currently experiencing in the direct-to-consumer mental health and chronic condition markets."
Gorevic went on to cite rising advertising costs and an elongated sales cycle as causes for revision but reiterated his belief and confidence in the company moving forward.
As recently as February, company management revised its guidance upwards to 31% for compound annual growth rate (CAGR). Now, only a fiscal quarter later, that figure has been brought down to just 23% for 2022 -- a stark contrast indeed. Revenue expectations of $2.55 billion to $2.65 billion were cut to $2.4 billion to $2.5 billion, while EBITDA estimates were also slashed.
Right now, Teladoc's stock appears to be in freefall. While we are certainly in a very reactionary period when it comes to the stock market and earnings calls, a fall-off flirting dangerously with the 50% barrier has to be taken very seriously. The question that investors need to ask themselves is whether or not Teladoc was simply overvalued, or has the underlying investing thesis changed significantly?
The company remains unprofitable, and the entire telehealth industry appears to be sliding following the soaring highs of the past couple of years. Its market leadership is to be admired, but being unable to capitalize on that position through profitability is something that's likely to concern investors the longer it goes on.
An economic downturn, such as the one we're currently experiencing, could have dramatic effects on the amount people are willing to pay for healthcare. Teladoc outlined this in its last annual 10-K report. While it's certainly too soon to say whether or not Teladoc will bounce back from this, it would be wise to continue monitoring the situation and to assess your previous thesis on the company in light of recent events and the current realities of the market.
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