Teladoc Health Is Overvalued After Its Sell-Off

  • TDOC stock is like a falling knife now. Trying to catch Teledoc at this point is dangerous, risky and without any logic.
  • Teladoc Health (TDOC) has declined 64% in 2022.
  • It’s a bad idea to buy shares ahead of major events like earnings releases.
  • The company lowered its guidance for 2022, not a positive sign, and expects a wider net loss.
The Teladoc (TDOC) logo through a magnifying glass.
Source: Postmodern Studio / Shutterstock.com

Teladoc Health (NYSE:TDOC), a leader in whole-person virtual care, has been underperforming the U.S. stock market in 2022 by a wide margin. The S&P 500 has losses of 18% and TDOC stock is down approximately 64%.

The first-quarter 2022 results sent TDOC stock into freefall as on April 27 the closing price was $55.99, the date of the earnings announcement, and the next day the stock tumbled 40%.

There are two scenarios now to think about. The first one is that this sell-off may soon end, and the stock will bottom soon. I argue this is the worst idea as trying to be a hero and catch a falling knife is too risky.

The second scenario is to expect further weakness and avoid TDOC stock. This is the preferable scenario, and here is why I support it.

Ticker Company Current Price
TDOC Teladoc Health, Inc. $32.74

The Fall Doesn’t Make TDOC Stock a Buy

Is Teladoc Health overvalued? Before answering this, it is trivial to refer to my previous article on Teladoc Health.

I had cited five key reasons why I didn’t think the stock was a “buy” at that point, including the annual slowdown in revenue, poor business operations, a long-term decline in gross margins, a stock dilution and that the firm lost money from 2017 to 2021.

Now to the question of whether TDOC stock is overvalued. Looking at the price-book value of 0.5 you may think there is a bargain here. The price-sales ratio of 2.3 tells another story and the price-cash flow ratio of 29.4 is at a premium of 58.2% compared to the health care sector median value of 18.5.

As the company is unprofitable, I give little importance to the low P/B value ratio.

Buying Shares Ahead of Earnings Is a Bad Idea

Imagine you had the idea to buy Teladoc Health stock on the day before the announcement of its Q1 2022 earnings. Like Cathie Wood did.

Not a great idea, not a good decision. I am not saying a smart one because the odds are 50% in favor and 50% against any stock rising or falling when earnings are released.

Could the stock have rallied instead? Sure, but consider that 50% chances are not giving you a competitive edge in investing. It is like rolling some dice and making investment decisions. There is no analytical approach. I believe that given the poor fundamentals of the company the odds were a bit higher towards the stock moving lower as it did.

Continued Selling Pressure

The one key point out of the Q1 2022 earnings report to place your attention on is not the year-over-year increase of 25% in sales growth or the massive net loss of $6,674.5 million versus a net loss of $199.6 million in Q1 2021.

The guidance for 2022 is the key focus. For the full year, revenues are expected between $2.4 billion and $2.5 billion, lower than previous guidance of $2.55 billion and $2.65 billion. Adjusted EBITDA is estimated to be $240 million to $265 million, lower than the previous expectation of $330 million to $355 million. The net loss per share is expected to be $43 to $43.50, wider than the previous estimate of $1.40 to $1.60.

These revisions do not look good at all. Expect further volatility for TDOC stock and avoid catching this falling knife. It may hurt a lot.

On the date of publication, Stavros Georgiadis, CFA  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.

Stavros Georgiadis is a CFA charter holder, an Equity Research Analyst, and an Economist. He focuses on U.S. stocks and has his own stock market blog at thestockmarketontheinternet.com. He has written in the past various articles for other publications and can be reached on Twitter and on LinkedIn.


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