Exploring Teladoc Stock’s Decline and Potential for a Rebound

Teladoc Health (NYSE:TDOC) has seen a staggering year-to-date loss of over 33%, significantly more than the S&P 500 Index ($SPX). The stock, which reached its peak at a closing high of around $295 in February 2021, has since experienced a downward spiral, including a substantial 74% decline in 2022.
Despite the broader market rally last year, Teladoc remained in the red, causing disillusionment among investors. However, Cathie Wood of ARK Invest demonstrated confidence in this telehealth stock by doubling down on her investment. ARK Investment Management holds a substantial 12.71% stake in Teladoc Health, making it the largest shareholder.
Currently, Teladoc Stock is trading close to its all-time lows, contrasting with the recent record highs seen in the broader markets. This downward trend prompts questions about the extent of its decline as investors steer clear of perennially loss-making companies.
One of the primary reasons for Teladoc Health’s downward trajectory, alongside other former “stay-at-home” winners like Chegg (NYSE:CHGG) and Zoom Video Communications (NASDAQ:ZM), is the deceleration in growth. While TDOC experienced robust revenue growth of 98% and 85.8% in 2020 and 2021, respectively, this growth dwindled to 18.4% in 2022 and a mere 8.1% last year.
Analysts forecast tepid revenue growth of 2.4% in 2024 and 3.9% in 2025, indicating a departure from its previous status as a growth company. Additionally, Teladoc Health has been consistently reporting losses, despite generating positive free cash flows. The hefty stock-based compensation further weighs down its financials, raising concerns among investors.
Looking ahead, Teladoc Health anticipates modest revenue growth and margin expansion over the next three years. Efforts to enhance cost efficiencies and reduce stock-based compensation aim to bolster its financial performance. The company targets adjusted earnings before interest tax, depreciation, and amortization (EBITDA) of at least $425 million by 2025.
Despite pessimism surrounding Teladoc Stock, analysts’ lowest target price of $16 exceeds current levels, suggesting limited downside potential. The mean target price of $20.55 reflects a 38% upside from recent closing prices. While most brokerages maintain a neutral stance on Teladoc Health, the company is actively pursuing growth opportunities, such as international expansion and diversification into new sectors like pediatrics and weight management.
Teladoc Health’s depressed stock price, coupled with attractive valuation metrics, including a low price-to-sales multiple and enterprise value-to-EBITDA ratio, suggests a potential buying opportunity. Despite its recent growth deceleration, Teladoc Health remains well-positioned to capitalize on its expansive virtual care network and explore new avenues for growth. Investors may find the current valuation compelling, offering an attractive risk-reward proposition.