Should You Buy Teladoc Before Its Earnings Report?
The pandemic pushed Teladoc Health (NYSE: TDOC) into the spotlight. The provider of virtual medical visits saw business -- and its stock price -- soar during the first year of the health crisis. The good news is that business continued to thrive even as medical offices returned to usual operations and people returned to their routines. The bad news is Teladoc's shares haven't followed.
The stock lost 54% last year and is down nearly 20% so far this year. Teladoc is set to report earnings on Feb. 22 after the stock market closes.
Analysts expect a 43% increase in fourth-quarter revenue to $545 million. The question is, should you buy Teladoc before the upcoming report and bet on a rebound in this once dynamic stock?
Image source: Getty Images.
Reasons behind the weakness
First, let's take a quick look at the reasons behind Teladoc's weakness. Some investors worry about competition from current players like American Well and newer rivals like Amazon. The retail giant has been expanding its Amazon Care offerings. Another concern is that the business gains that Teladoc made during the pandemic won't last.
Now let's talk about these two potential problems. Teladoc's international presence offers it a significant advantage in the market. Amwell, for example, focuses on virtual medical visits in the U.S., and Amazon Care is still only available in certain locations. The company's growth in "whole-person care" (more on this below) is also driving growth. CEO Jason Gorevic says the company's "extremely strong" retention rates show it's doing just fine, versus rivals.
As for post-pandemic business, there's evidence that telehealth visits weren't a passing fad. That comes in the form of Teladoc's revenue and online visits over the past year. Total nine-month revenue climbed 108% to more than $1.4 billion, and visits advanced 59%. The company, citing outside research reports, says 60% of people today say they would be interested in a virtual-healthcare plan.
Now let's look at what may keep up Teladoc's revenue momentum. I briefly mentioned above the idea of whole-person care. This refers to the company's ability to serve all of a person's healthcare needs, from mental health to physical health.
One key area where Teladoc is making great gains is in chronic care. This is important because more than half of Americans suffer from at least one chronic condition and about 27% of Americans have multiple chronic conditions. That's according to a research brief by the Centers for Disease Control and Prevention.
Gains in chronic care
In the third quarter of last year, Teladoc said 24% of chronic-care members were enrolled in multiple programs. That's up from 8% in the year-earlier period. Teladoc acquired Livongo, a specialist in the virtual management of chronic diseases, in 2020. The purchase has added expenses that are weighing on Teladoc's earnings now, but the operation is showing signs it will pay off in the long term.
Teladoc's outlook is positive. Last month, in a presentation, the company predicted a compound annual growth rate for revenue in the range of 25% to 30% through 2024. And the company forecasts revenue this year of $2.6 billion and revenue in 2024 of more than $4 billion. It expects to reach that growth by increasing members by 1% to 5% every year and increasing revenue per member by about 25% annually.
Teladoc's earnings report next week will offer us more insight into recent progress. So, should you buy shares now with the hope that Teladoc will beat estimates and gain? Or should you wait, just in case the news isn't as bright, the shares decline, and you might get the stock for a lower price?
I wouldn't recommend either. It's best to bet on Teladoc -- and stocks, in general -- for the long term. And that means whether you buy the shares today or after the earnings report, it probably won't make much of a difference a few years down the road.
That also means it's best not to panic or cheer too excessively over the news in one earnings report. It's better to look at trends and outlooks over time. And today, these indicators are looking pretty positive for Teladoc.
10 stocks we like better than Teladoc Health
When our award-winning analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
They just revealed what they believe are the ten best stocks for investors to buy right now... and Teladoc Health wasn't one of them! That's right -- they think these 10 stocks are even better buys.
*Stock Advisor returns as of January 20, 2022
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Adria Cimino owns Amazon. The Motley Fool owns and recommends Amazon and Teladoc Health. The Motley Fool has a disclosure policy.
