As many people know, Teladoc Health’s stock price had fallen by more than 50% since it hit a record high on February 7, 2021.
What is behind the recent fall in stock price of Teladoc, which has been rumored to be a promising stock in the future?
One reason for the stock price stagnation is a slowdown in Teladoc’s revenue growth. Fig. 2 shows the growth of Teladoc’s total revenue (QoQ). As shown in this figure, the growth of Teladoc’s total revenue has been declining since 2020 Q4. The background to this is that number of paid membership of Teladoc has already exceeded 50 million. Considering that the population of US citizens is about 330 million, we cannot expect the further significant increase in the number of the paid membership of Teladoc’s existing businesses. In fact, as shown in Fig. 3, the number of paid membership has already reached a plateau.
Another cause of Teladoc’s stock price stagnation is that Teladoc is currently recording a significant net loss. Due to acquisition such as Livongo, which was announced in 2020 Q2, Teladoc is currently recording a large amount of acquisition-related costs. As shown in Fig. 4, Teladoc’s net loss was drastically increased especially since 2020 Q4. Since the continuous recording of such net loss may lead to a decline in shareholders’ equity ratio as well as pressure on management in the future, it is desirable to reduce the amount of the net loss as soon as possible.
But, has the future of Teladoc already been lost? Watanabe & Brothers’ Investment believes that Teladoc has continuous potential for future sustainable growth.
What should be noted is changes in number of Chronic Care Enrollment shown in Fig. 3. Although the number of the enrollment is still small, it has shown 9-10% growth since 2021 Q1 (QoQ). This shows that the acquired Livongo’s business is also growing steadily on the Teladoc’s platform. It is generally known that chronic diseases have a long treatment period and high dosage. For these reasons, we believe that increasing number of Teladoc’s Chronic Care Enrollment may significantly improve the profitability of Teladoc.
Finally, Teladoc’s Depreciation & Amortization, including the acquisition-related expenses, remains around 10% of the total revenue (Fig. 5). For this reason, we believe that the acquisition of Livongo etc. was not an excessive upfront investment, and it was an appropriate management decision to secure future growth of Teladoc in a situation where the growth potential of existing businesses is reaching a plateau.
Watanabe & Brothers’ Investment will continue to invest in Teladoc Health.
Teladoc Health, Inc. (NYSE: TDOC) Stock Chart
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- Watanabe & Brothers’ Investment is holding shares of Teladoc Health.
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