Teladoc Health gaps down to support level after weak guidance

Key Points

• Teladoc Health stock is down sharply after weak 2024 guidance. 
• The company is finding it harder to capture market share as virtual care is now a mainstream option.  
• Institutions may not be giving up on TDOC stock, but it may be a better trade than an investment.  

One of 2021's favorite meme stocks is falling on hard times. Teladoc Health Inc. NYSE: TDOC stock is down more than 22% in early morning trading after the company delivered a poor outlook for 2024.  

Teladoc generated $660.50 million in revenue for the fourth quarter, a 4% year-over-year (YOY) improvement. The company's negative loss per share of 17 cents was also better than the negative 23 cents per share in the fourth quarter of 2022.  

But that was about as good as it got. The company posted weak guidance with projections for low single-digit growth in subscriber growth and revenue. And the company will continue to be unprofitable throughout 2024. 

One comment that should bother the bulls 

On balance, Teladoc didn't deliver an awful report. But it's not a profitable company, and its business model relies on being able to grow its customer base. That's why one comment on the company's earnings call stood out.  

Chief executive officer Jason Gorevic said, "...it's important to remember that most US healthcare consumers have access to virtual urgent care today. So, it's largely a replacement market at this point." 

The takeaway is that, at least for one market segment, the company will have to fight hard to win customers. This is at a time when Teladoc is trying to cut its acquisition costs to become profitable. To that end, Gorevic predicted that revenue growth for the company's virtual care products in the United States would be in the low single digits. 

More tools in its toolkit 

The counterargument from the bulls would be that Gorevic's comment was only regarding chronic and urgent care. But Teladoc launched its BetterHelp service for mental health. The company also plans to expand its specialty wellness offerings to include weight management and pediatric care.  

As Teladoc correctly notes, demand for mental health services exceeds supply. And the nature of mental health makes virtual care a preferable option.  

That said, investors were closely watching the subscriber count and revenue from BetterHelp. They were disappointed. BetterHelp did deliver double-digit adjusted EBITDA growth for the quarter and the full year. However, revenue and margins fell below the company's expectations.  

You have to spend money to make money. However, at least for now, that's not showing up in Teladoc's numbers. And it's not likely to for several quarters.  

Why Teladoc may still be worth watching 

TDOC stock knifed below its 50- and 200-day simple moving averages. At around $15.50 as of this writing, the stock is at a key support level that it hit in late October 2023 and again in November 2023. But that sell-off may be overdone.  

The Teladoc analyst ratings on MarketBeat show one analyst, Canaccord Genuity Group, lowered its price target from $32 to $26 but reiterated its Buy rating. That suggests that analysts needed a reason to sell TDOC stock, and they got it.  

As I mentioned at the start of this article, Teladoc was one of the popular meme stocks. It went public in 2019 and caught lightning in a bottle from a global pandemic that provided a powerful use case for virtual care. Needless to say, investors aren't valuing the stock as one of the top technology stocks. Except maybe Cathie Wood. That remains to be seen.  

Nevertheless, institutions may still see value ... at the right price or as an acquisition target. And a $26.60 price target is a 29% gain. That's why it may still belong on your watchlist.  

Still, right now, TDOC stock may be a better trade. Short interest is at 11.6%, and I imagine it will increase as many traders buy put options. That's a lot of selling pressure. But it's also fuel for a squeeze if the company can hit its lowered expectations.