Thursday was… not a very fun day to be a shareholder of Teladoc Health (TDOC).
Teladoc shares fell 40% yesterday after the telemedicine pioneer reported staggering losses of $41.58 per share for its fiscal first quarter 2022. Was that loss as bad as it sounds? Here’s a hint: before the earnings announcement, all of Teladoc’s shares were priced at just $56 per share. Thus, in one quarter, Teladoc practically lost about 74% of the company’s value.
Needless to say, Teladoc “missed out on gains” with this result. Analysts had only expected a loss of $1.31 per share. Teladoc also missed sales, if not by a lot, bringing in $565.4 million in revenue where Wall Street expected $568.8 million. However, management has warned that many, many more will be missing before the end of this year. For the full fiscal year 2022, Teladoc expects to generate sales of approximately $2.45 billion, at least $100 million less than Wall Street forecasts and approximately $150 million less than Teladoc itself had previously foreseen this.
And yet, Berenberg analyst Dev Weerasuriya thinks all is not yet lost for Teladoc.
In a report responding to earnings news, Weerasuriya says the sharp sell off of Teladoc shares by investors – while understandable – was “probably overdone”. After all, most of Teladoc’s loss in the first quarter was due to a $6.6 billion non-cash goodwill impairment charge for its ill-considered acquisition of Livongo, which will not be repeated in the future. Meanwhile, Weerasuriya notes that Teladoc grew sales another 25% in the quarter and should grow revenue by at least 15% per year from now – if not 20%, maybe 30% – and should be able to earn as much as 15% operating profit margins on those revenues.
That’s not to say Weerasuriya is completely happy with Teladoc stock right now. On the contrary, he admits that the telehealth market seems much more competitive now than it once was, and indeed, “competition is disrupting Teladoc’s business.”
Competition also makes the business more expensive: “An increasingly crowded market for advertising dollars is driving up customer acquisition costs,” warns the analyst. Finally, it apparently takes longer to sell chronic care services — which is a big deal because, as Weerasuriya notes, chronic care is “the long-term growth engine” for Teladoc (emphasis added).
That being said, Weerasuriya still maintains that Teladoc is worth at least $55 based on its projected growth rate and profit margins, and could be worth even more than that. Indeed, while Weerasuriya is asking for time to conduct a “deeper review” of the issues plaguing the company, he is sticking to a price target of $141 per share on the stock for now.
If that’s the right price, that would mean Teladoc’s stock could more than quadruple from here. So unless and until he is convinced he is wrong about this, Weerasuriya maintains his “buy” rating on the stock. (To see Weerasuriya’s track record, Click here)
What is the rest of TDOC Prospects ST doing? 9 more analysts join Weerasuriya in the bullish camp, and with 18 additional holds, analyst consensus sees the stock as a Moderate Buy. Based on the average price target of $63.06, the shares should change hands for a premium of around 80% in a year. (See TDOC stock forecast on TipRanks)
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Warning: The views expressed in this article are solely those of the analysts featured. The Content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.