Teladoc Health Is Not a Great Defensive Stock in 2022
InvestorPlace - Stock Market News, Stock Advice & Trading TipsTDOC stock has not performed well in 2022. Tougher times may be ahead as revenue growth is expected to slow...
Teladoc Health, Inc. (NYSE:TDOC), a telehealthcare services provider, has been delivering exceptional revenue growth in the past four consecutive years. It could benefit from the global risk-off sentiment as unfortunately, Russia began its invasion in Ukraine. Global financial markets will witness elevated volatility. Additionally, oil prices have spiked and gold prices just got a boost out of nowhere; all due to geopolitical tensions.
The Healthcare sector is among the defensive sector in times of economic cycles and unforeseen events, like geopolitical risks. This is because healthcare companies offer services that people will need in hard times. Still, among a global sell-off in equities, what are the chances for shares of Teladoc Health to make a difference?
The 1-Year performance of nearly -65% is not bullish. The year-to-date return of -15.7% is also negative news. Even with the latest news about the Ukraine invasion, the stock market is not that enthusiastic with the prospects of Teladoc Health. Could fourth-quarter (Q4) 2021 earnings be the catalyst for the firm to witness a rebound in its stock price?
Let's start with the latest financial results. The stock price of $65.30 at the close of the stock market trading session on Feb. 22 rallied to a high of $69.14 on Feb. 23. It then closed at $61.46. Currently, the stock is back up at $76.57.
Astute investors will notice a faded rally, which is typical of two conditions. First are better than expected financial results. Second is that a broader negative investment sentiment was dominant and could keep the fire of a higher stock price burning. This is the riskiness of the stock market. Life does not give you what you want; it has other plans.
TDOC Stock's Latest Financial Results
The telehealth provider's latest financial results were mixed. An earnings per share GAAP of -$0.07 was a beat by $0.51 and revenue of $554.24 million was a beat by $7.69 million.
The Q4 2021 highlights showed a revenue increase of 45% to $554.2 million from $383.3 million in Q4 2020. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) increased 53% to $77.1 million, compared to $50.4 million in Q4 2020.
The GAAP gross margin was 67.5% for Q4 2021, a marginal increase compared to 67.2% for Q4 2020. Other positive news was that average revenue per U.S. paid member increased to $2.49 in the Q4 2021 from $1.63 in Q4 2020 and $2.40 in Q3 2021.
Despite the substantial revenue increase, Teladoc Health reported a net loss of almost $11 million, or $(0.07) per share. This is compared to almost $394 million, or -$3.07 per share Q4 2020.
If a quarter is indicative of strong financial performance, a full year is even more important as it encompasses trends that reveal more reflective strengths and weaknesses of the business model.
For the full-year 2021, Teladoc Health reported revenue growth of 86% to $2.03 billion. Additionally, total visits increased 38% to 15.4 million. The firm stated its full-year 2022 revenue guidance of $2.55 to $2.65 billion, or a 25% to 30% growth.
This would mean a declaration of growth. For example, in 2020, revenue growth was 97.71%. The revenue growth in 2021 is also a slowdown. Revenue growth did not result in profitability either, as a net loss for 2021 was $428.79 million, compared to a net loss of $485.13 million in 2020.
If the glass is half-full or half-empty now, should you be bullish or bearish on TDOC stock? I choose to be bearish for the following reasons.
Warning Signs Are Hard to Ignore for TDOC Stock
There are at least five key risks to evaluate. First is the annual slowdown in revenue growth. Second, TDOC Stock has an average Piotroski F-Score of 3, implying poor business operation. Third, the gross margin has been in long-term decline. The average rate of decline per year is -2.8%.
Fourth, shareholders have been diluted in the past year, with total shares outstanding growing by 6.8%.
Finally, the company remains unprofitable. These risks added together build a solid bearish thesis. Teladoc Health should strive for profitability as slower revenue growth indicates a loss of momentum. The firm needs time to figure out what radical changes are needed to bring results, namely profits.
On the date of publication, Stavros Georgiadis, CFA did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
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