Why Should You Stay Away From Teladoc Health (TDOC) Now?
Rising competition and decreasing business volumes place Teladoc Health (TDOC) in a precarious position.
Shares of Teladoc Health Inc. TDOC have been on a downslide this year so far after having a great run last year.
The telehealth company, which provides medial consultation to patients saw tremendous demand for its products and services in 2020 as COVID-19 compelled people to carry out their lives from within the four walls of their home.
In 2020, the stock surged 138%, trouncing the S&P return of 20.6%. However, this year to date, the stock has entered the investors’ favorite list. As the grip of coronavirus started easing, vaccinations became rife and restrictions to go out were lifted, the stock is continuously on a decline.
So far this year, the stock has plunged 37% against the S&P 500 Index’s rise of 16%.
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As people start venturing out, the visit to clinics and physicians is expected to resume. After all, face-to-face and in-person consultation is more satisfactory than the same being done online. Since virtual consultation was the only option left during the coronavirus, with the pandemic situation subsiding now, demand for Teladoc’s services is anticipated to taper.
A glimpse of the weakness was seen in the company’s guidance for 2021, which though calls for growth of 82% in revenues, is lower than the 98% rise recorded in 2020. Total visits are expected to inch up 2.6% compared with 206% registered in 2020 while U.S paid membership is estimated to grow 2.3% compared with the 41% increase seen in 2020. U.S Fee Only Access is assumed to increase 5.6% compared with the 10% rise observed in 2020.
These figures clearly point to roaring growth achieved in 2020, which by no means is predicted to be replicated this year.
While on one hand, demand is cooling off, on the other, competition is heating up. Recently, many telehealth companies with the likes of GoodRx Holdings Inc., American Well Corporation AMWL and SOC Telemed came out with their Initial Public Offering (IPO) to scale up their operations.
Moreover, the space attracted the retail behemoth Amazon.com, Inc. AMZN, which launched its remote care product Amazon Care. Cigna Corp. CI also entered the virtual care market with the acquisition of the telehealth company MDLive.
The company is yet to be profitable and increasing competition can further hamper its growth.
For the current year, the Zacks Consensus Estimate for the company’s loss from operation stands at $3.44, indicating deterioration from the loss of $1.33 incurred in 2020.
Thus for the time being, it’s better to avoid the stock of Teladoc. The stock currently carries a Zacks Rank # 5 (Strong Sell).
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