Technology

Teladoc (TDOC) Down 9% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for Teladoc (TDOC). Shares have lost about 9% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Teladoc due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Teladoc Q2 Earnings Lag Estimates, Revenues Up Y/Y

Teladoc Health incurred second-quarter 2020 loss of 34 cents per share, wider than the Zacks Consensus Estimate of a loss of 23 cents. However, the reported figure was narrower than the year-ago quarter’s loss of 41 cents per share. This was primarily due to strong revenue growth, which was driven by higher demand for its telehealth services amid the COVID-19-induced uncertainty.

Behind the Headlines

The company’s operating revenues of $241 million surpassed the Zacks Consensus Estimate by 9.45% and also surged 85% year over year. This upside can be attributed to the strong performance of its revenue components, namely subscription access fees and visit fees.

Revenues from subscription access fees (which comprised 75.6% of total revenues) soared 64% year over year to nearly $182.2 million. Within this, subscription fees from the United States accounted for $152 million or 83.4% of total access fees (up 78% year over year) while international subscription fees made up the remaining 16.6% or $30.2 million (up 17%).

The company generated $58.9 million in visit fee revenues from general and medical visits, up 209% year over year. Adjusted gross margin declined 570 basis points (bps) year over year to 62.3%.

Total visits of 2.755 million skyrocketed 203% year over year on membership gains in U.S. visit fee (up 468%) and international visits (up 85%).

Teladoc ended the quarter with U.S. paid membership of 1.996 million, which soared 227% year over year. Total expenses in the quarter were $248.2 million, up 63% year over year, primarily due to higher advertising and marketing, sales, technology and development, legal and regulatory, acquisition and integration related costs, and general and administrative expenses.

Adjusted EBITDA was $26.3 million for the second quarter, which skyrocketed 317.5% from the prior-year quarter.

Financial Update

As of Jun 30, 2020, the company had $1.3 billion in cash and cash equivalents, up 154.5% from the level at 2019 end. Total debt as of Jun 30, 2020 was $948.2 million, up 115.3% from the level as of Dec 31, 2019.

Third-Quarter Guidance

For third-quarter 2020, the company expects total revenues of $275-$285 million and total adjusted EBITDA of $27-$31 million. It projects total visits between 2.5 million and 2.7 million. Net loss per share is expected to be 30-35 cents per share.

2020 Outlook

For the full year, the company anticipates revenues between $980 million and $995 million, and adjusted EBITDA in the band of $85-$92 million. It projects the total U.S. paid membership to be at least 50 million while visit fee only access is estimated to be available to 19-20 million individuals. Total visits are expected in the range of 9.8-10.3 million, and net loss per share between $1.36 and $1.45.

Preliminary 2021 Outlook

For the next year, Teladoc expects revenue growth to witness a year-over-year rise in the range of 30-40%.
 

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month. The consensus estimate has shifted -24.44% due to these changes.

VGM Scores

Currently, Teladoc has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. However, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Teladoc has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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