Buying Opportunity on Teladoc Health's Latest Quarter Figures

Medical services got a fundamental shift when Teladoc Health (NYSE:TDOC) came on the scene. With a pandemic in full swing, and medical professionals at least a little leery about being in the same room with patients, Teladoc was a godsend. Its  primary stock in trade—a system that allowed for easy videoconferencing-based doctor's visits—became a magic bullet to see patients without exposing yourself to potential disease transmission vectors. The latest numbers out of Teladoc show that there's clear interest, but some other problems may be involved.

A Huge Quarter, In Every Way

Teladoc Health posted a substantial loss, one that shattered expectations, and not in a good way. The company posted an adjusted net loss of $3.07 per share, which in objective terms comes out to be $394 million. FactSet analysts, meanwhile, were expecting a loss of $0.26 per share. Much of the losses stem from the company's merger with Livongo, reports note, particularly the growth of stock-based awards expenses from vesting stock interests.

However, Teladoc also had a win in revenue, turning in $383.3 million against expectations of $379 million. Teladoc handily beat what it turned in this time last year, with revenue more than doubling from the fourth quarter of 2019's figure of $156.5 million.

The company has also seen use rates spike, as visits cleared 10.6 million total, representing a 156% increase. Full-year revenue, meanwhile, was double the figure seen in 2019, hitting $1.094 billion, a 98% growth rate against 2019's figures.

Teladoc even offered up guidance for the first quarter of 2021, which looked positive in some ways and less so in others. Total revenue is expected to be between $445 million and $455 million, though there will still likely be a loss until the adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) kick in.

Slipping Sentiment in the Analyst Pool

Teladoc Health has enjoyed a “buy” ranking from the analyst pool for the last six months, our latest research notes. For the last three of those months, however, there has been a noticeable decline in sentiment toward the bearish.

Six months ago, the company had 12 “hold” ratings and 15 “buy” ratings to its credit. That improved toward the bullish three months ago, as it came in at 10 “hold” and 18 “buy”. This started a downward slide with figures seen a month ago, coming in at 12 “hold” and 17 “buy”. Now, it's down one step further to 13 “hold” and 17 “buy”. That's still better than the consensus called for six months ago, however, which suggests there's still a lot of positive sentiment around Teladoc.

The price target meanwhile, has been climbing steadily and is actually close to the current share price. Six months ago, it was at $204.85, and that increased to $223.07 three months ago. Another jump came in a month ago when the price target leapt to $238.57, and one more jump came in with the latest figures at $241.61. Given that the current share price is $237.25 as of this writing, the price target has almost achieved parity with the actual share price.

A Major Technological—and Medical—Advancement

Thankfully, most of Teladoc's earnings problems seem related to its acquisition of Livongo, which suggests that there's a light at the end of that particular tunnel. Eventually Livongo will be fully onboard and the company will be able to keep more of its earnings in place.

While certainly, Teladoc got a major boost from the pandemic—and one that's likely to fade a bit as the pandemic itself is taken on by vaccines and therapeutics—it's a safe bet that medical professionals will maintain their interest in Teladoc for some time to come. Just because this pandemic is successfully addressed doesn't mean that the next one will never come. Having tools like Teladoc's in play only helps matters. With the rural internet divide starting to close thanks to things like 4G home internet and the ongoing efforts of Elon Musk's Starlink satellite internet systems, telemedicine will likely have the necessary infrastructure to succeed.

Teladoc's systems are valuable today, and made a great way for doctors and patients to connect in the pandemic's worst days. The value here likely won't lose any ground going forward, so Teladoc likely remains a solid investment as the leader in the field. Some will be scared off by the high price tag per share, which could mean greater growth opportunities elsewhere. We've already seen as much from Stephens' downgrade back in December. Teladoc, however, will likely have the whip hand in the field for some time to come.