Teladoc shares try to rebound from the huge downward gap

Teladoc Health (TDOC.US) is the largest remote health care company in the United States and the world, whose shares gained particular popularity and increased in valuation during the coronavirus pandemic, reaching valuations of over $300 per share at its peak. Currently, the company is trading at around $36, and the quarterly report presented on Thursday, April 28 resulted in a nearly 45% discount to the stock. Are the company's growth prospects really that weak? What has fundamentally changed from the pandemic trends?

• Teladoc shares are trading nearly 90% below historical highs, having lost more than 60% of their value since the beginning of the year;

• Q1 2022 revenue increased 25% to nearly $556 million compared to the same quarter in 2021;

• Net loss per share was $41.58 vs $1.31 in Q1 2021, primarily due to a $6.6 billion goodwill impairment loss driven by the Livongo acquisition. It was this factor that 'spooked' a significant number of investors;

• The company in its quarterly report released lowered its growth forecast for 2022 which worried investors because for still unprofitable companies like Teladoc, it is revenue growth that is key and determines further growth potential;

• The company lowered its forecast by less than 6%, keeping it at 20%. Teladoc also reported a 4% reduction from Q1 2021 EBIDTA, which was $54.5 million. According to management, the reason for this was the temporary problems of the BetterHelp platform, which is struggling with fledgling competitors who are spending millions of dollars on advertising to compete with the market leader, Teladoc. The company's CEO, Jason Gorevic called these actions 'irrational economic decisions' on the part of smaller companies and added that Teladoc does not intend to increase its marketing spending;

• The company estimates that competition in the mental health market (BetterHelp platform) will encounter, among other things, regulatory issues related to prescribing, which Teladoc has long had which could strengthen the company's position as a leader in a still young market. AmWell remains the company's biggest competitor, but a financial chasm still separates the company from the scale of Teladoc's services;

• In 2020, the company completed the acquisition of Livongo, a chronic disease data processing company for a staggering $18.5 billion. It was the largest acquisition in the history of remote medicine. So far, however, it has taken a toll on the company's financials, and it's still too early to talk about the significant benefits of the acquisition, although Gorevic points out that the acquisition was strategic for the company because Teladoc provides both mental health and chronic disease services, making it necessary to integrate with Livongo's system (the Primary360 service);

• The loss of 6.6 billion in goodwill was mainly due to costs associated with the Livongo acquisition, which means some long-term investors may view the current valuation as a buying opportunity. That's what Cathie Wood's Ark Invest fund has done, with the average price of a stake in Teladoc now hovering around $160. The fund has lost nearly 50% since the beginning of the year after enjoying significant gains during the pandemic thanks to up-and-coming, popular companies in the portfolio;

• CEO Jason Gorevic has been developing Teladoc for more than a dozen years, which in the past faced regulatory problems related to the provision of remote medical advice, now the attitude of regulators has clearly changed which also has to do with the developing trends among the public that expects expansion towards remote services;

• The company's primary goal is to reach out to large corporate clients who could provide the company with thousands of customers - employees interested in receiving remote medical care from Teladoc for them and their families. A deal between Amazon and Teladoc for customer medical services is still possible. On April 25, the company hired Dr. Vidya Raman-Tangella as Chief Medical Officer. Tangella previously served as General Manager of Healthcare and Life Sciences Solutions at Amazon Web Services, where she led the healthcare solutions strategy and helped establish a formal function to develop a portfolio of data-driven technologies and solutions for the healthcare ecosystem.

• The PB ratio is currently 0.64, near the lows of the company's entire 8-year trading history. For comparison, Teladoc's sector average is about 2.81, and the company's historical PB Ratio average is over 4.00. A PB reading below 1 is considered attractive to value investors using fundamental analysis, but in Teladoc's case it is still difficult to estimate when the company will be able to achieve profitability. However, if indeed the company turns out to be profitable in the long term, the current opportunity price can be seen as an investment opportunity

Teladoc (TDOC.US) share price, D1 interval. The stock has been moving in a dynamic downtrend since February 2021. The long-term uptrend line was broken in December 2021, the share price was not able to stay above $100. We can see that the price level near $72, which coincides with the 78.6 Fibonacci retracement, has also not been sustained. After lowering the growth estimates for 2022 in the report, we see a huge downward gap. It is worth noting that the information about the results hit an exceptionally 'fertile ground' because the end of last week was the worst for Wall Street since 2020 which intensified the supply reaction.  Source: xStation5