Teladoc Health shares after weak guidance

One of the favorite meme stocks of 2021 is going through a rough patch. Teladoc Health Inc. NYSE:TDOC Shares fell more than 22% in morning trading after the company gave an unfavorable outlook for 2024.

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

But this was all good. The company posted weak guidance with projections of low single-digit growth in subscriber and revenue growth. And the company will continue to be unprofitable through 2024.

A comment that should disturb the bulls

All things considered, Teladoc didn’t provide a terrible report. But it’s not a profitable company, and its business model relies on the ability to grow its customer base. That’s why one comment on the company’s earnings call stood out.

CEO Jason Gorevic said, “…it’s important to remember that the majority of U.S. healthcare consumers today have access to virtual urgent care. So at this point, it’s largely a replacement market.” .

The bottom line 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 reduce acquisition costs to become profitable. To that end, Gorevic predicted that revenue growth for the company’s virtual assistance products in the United States would be in the low single digits.

More tools in its toolkit

The bulls’ counterargument would be that Gorevic’s comment only concerns chronic and urgent care. But Teladoc has launched its BetterHelp mental health service. 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 have been closely watching BetterHelp’s subscriber numbers and revenue. They were disappointed. BetterHelp achieved double-digit adjusted EBITDA growth for the quarter and 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, this is not apparent from Teladoc’s numbers. And that’s not likely to happen for several quarters.

Why Teladoc is still worth watching

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

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

As I mentioned at the beginning of this article, Teladoc was one of the most popular meme titles. It went public in 2019 and took advantage of a global pandemic that provided a powerful use case for virtual care. It goes without saying that investors don’t rate the stock as one of the best tech stocks. Except maybe Cathie Wood. This remains to be seen.

However, institutions could still see value… at the right price or as an acquisition target. And a price target of $26.60 represents a 29% gain. Here’s why it might still belong on your checklist.

However, right now, TDOC stock may be a better trade. Short interest is at 11.6% and I imagine it will rise as more traders buy put options. There is a lot of selling pressure. But it’s also fuel for a squeeze if the company can meet its lowered expectations.

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