The Bears Were Right When They Sold Teladoc Months Ago
Investors probably should consider not buying Teladoc (NYSE:TDOC) stock prior to its upcoming Feb. 22 earnings announcement.
Although there is news which suggests it could significantly outpace guidance, there are just too many other negatives.
We’ll dig into the negatives but first: the good news for TDOC stock.
The Good News for TDOC Stock
About a month ago Teladoc announced that it expects to record $2.03 billion in 2021 revenues. That was good news because it would nearly double the firm’s 2020 revenue figures. On top of that, it was substantially higher than previous guidance.
Unfortunately, that news didn’t do much for TDOC stock’s price. It popped from $82 to $86 on the news, but quickly gave the gains back and then some: Two days later it was trading at $78.
At that time news outlets reported that investor apprehension about a demand drop off as Covid-19 cases decline caused Teladoc’s stock price to continue to fall. That’s certainly a strong argument in favor of selling or avoiding Teladoc.
But before getting into that, consider losses.
The Bad News: Mounting Losses
Teladoc’s 10-Q form for the first nine months of 2021 already painted an unflattering picture of the telehealthcare services firm. Growth was never a problem for the firm. Mounting losses were.
Teladoc’s revenues more than doubled through the first nine months of 2021 compared with the same period in 2020. But TDOC stock didn’t move upward when the news was released. Instead, Teladoc began a long descent.
There’s more to it than worry that telehealth demand will slow as the pandemic wanes. Investors are also worried about Teladoc’s mounting losses.
Through the first nine months of 2020 Teladoc reported a $79.56 million loss. A year later during the same period, that loss had increased to $437.46 million. In other words, Teladoc’s revenues increased by 108.5% while losses increased by 449.85%.
That’s why I think investors are more concerned with losses for the entire year than they are with the news that revenue guidance was increased. That’s doubly true in this investment environment: Growth stocks are not going to have an easy time following January’s 7.5% inflation figures.
Investors are going to move toward safety and value. And Teladoc, with those massive losses, certainly does not fall under the categories of value and safety.
A Pandemic Play
Teladoc is one of many stay-at-home pandemic plays that benefited massively at the height of lockdowns. That time is nearing its end even as omicron worries prolong the inevitable end. That spells trouble for Teladoc and other pandemic stocks like Zoom (NASDAQ:ZM) and Peloton (NASDAQ:PTON).
All of those three stocks are undergoing similar fates as the shine wears off the stay-at-home narratives underpinning their rises. Teladoc is down 74% from its 2021 highs. Peloton and Zoom are off by 79% and 68%, respectively.
It’s difficult to see why investors are going to buy into TDOC stock in such a tough environment. Especially when its growth prospects don’t even look that appealing moving forward.
Teladoc should exceed $2 billion in revenues for 2021 and come close to doubling 2020 revenues. But analysts expect the company to report approximately $2.57 billion in 2022. 26.6% revenue growth is a far cry from 100% growth.
That revelation is almost certainly going to cause investors to say “I told you so” about rapidly slowing growth at Teladoc.
What to Do With TDOC Stock
I recommend that investors avoid buying TDOC stock prior to its Feb. 22 earnings report in the hopes that they could outsmart the market.
All of the headlines out of the company will relate to unexpectedly strong top line growth from the company.
Expect that. Just don’t fall for it.
Next year is going to see a dramatic slowdown that everyone has already predicted. The premise that Teladoc is a dated pandemic stock is looking to be very true at this point. And those who were shouting that loud in months past look to be very correct.
If that isn’t enough to dissuade investors, its massive losses should be.
On the date of publication, Alex Sirois 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.
Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.
