How can you tell the market correction in 2022 has gotten under the skin of Teladoc Health (NYSE:TDOC) investors? The number of “class action alert” press releases surfacing has skyrocketed in recent days .
Since the telehealth company reported Q1 results on April 27, TDOC stock has lost 39% of its value. The company’s $6.6 billion non-cash impairment charge has something to do with the share price’s further retreat halfway through 2022.
Shareholders are pissed, and lawyers across the country are taking advantage of this by circling the class action wagon. But the reality is that investors have no one to blame but themselves for the current situation they find themselves in. Nobody said investing was easy.
The reality is that telehealth is here to stay, and barring any new revelations, Teladoc will be one of the primary beneficiaries. While it seems telehealth services have been around forever, the health care trend is still in the early stages of development.
If you are a patient, risk-tolerant investor, the potential class action lawsuits are a tempest in a teapot, making TDOC stock worthy of a closer look.
| TDOC | Teladoc Health | $34.14 |
TDOC Stock Is Battered and Bruised
The last time I wrote about Teladoc was in January 2020. I suggested that with shares nearing $100, shorting TDOC stock was a bad idea. And, quite frankly, I was leaning more bearish than bullish at the time. Over the next year, TDOC stock more than tripled to an all-time high of $308 in February 2021.
If you had shorted its stock, you would’ve gotten run over. Today, it’s trading at one-tenth of its all-time high. That’s put a bad taste in the mouths of investors who bought and lost.
But there’s no free lunch in investing. If you want guarantees, buy a Treasury bill.
Investors Were Warned
In a June 20 press release from one of the law firms suing Teladoc, Pomerantz LLP, one element sticks out: “Defendants largely attributed the Company’s poor performance, revised FY 2022 guidance, and $6.6 billion non-cash goodwill impairment charge to increased competition in its BetterHelp and chronic care businesses.”
It appears to me that the law firm is arguing that the company should have addressed these competitive threats much earlier than the first quarter of 2022.
That’s a nice theory. However, looking at page 21 of Teladoc’s 2021 10-K, you will see that it freely discusses the competitive threats it faces in its business:
The virtual care market is competitive, and we expect it to continue to attract increased competition, which could make it difficult for us to succeed. We currently face competition in the virtual care industry for our solutions from a range of companies, including specialized software and solution providers that offer competitive solutions, often at substantially lower prices, and that are continuing to develop additional products and becoming more sophisticated and effective.
The Securities and Exchange Commission (SEC) requires risks to be laid out in regulatory filings so investors can properly understand the potential downside of investing in a stock. Teladoc plainly did that.
To come back after the fact and argue that you were duped suggests these plaintiff investors feel they have zero accountability for their actions. That’s not how a free market works.
With 10,000 other stocks to invest in, they had other options. They simply chose to ignore the warning signs.
Teladoc Health Remains a Ways From Profitability
Analysts are expecting Teladoc to earn $2.43 billion in 2022 revenue, 19.6% higher than a year earlier. In 2023, they see revenue growing another 20.2% to $2.92 billion.
Teladoc said in its April earnings report that it would deliver $2.4 billion to $2.5 billion in revenue in 2022, which is in line with analyst estimates.
On the bottom line, analysts expect the company to report a loss of $42.85 per share in 2022, up from an estimated loss of $40.88 per share one month ago. Teladoc is projecting a loss of $43.25 per share for the year at the midpoint of its guidance. In 2023, analysts expect the company’s loss to narrow to $1.55 per share.
My biggest concern with Teladoc back in 2020 was that its pathway to profitability remained up in the air, making an investment a tough call. As you can see, its profitability remains very much in question today.
What is not in question, though, is the future of telehealth medicine in this country.
The Opportunity in TDOC Stock
The American Medical Association’s chief experience officer, Todd Unger, recently discussed the importance of protecting the future of telehealth medicine in a blog post:
Achieving permanent Medicare coverage of telehealth services for patients, including allowing them to continue receiving these services in their homes, is important for patient access to care. The AMA is working to ensure physicians have the tools, resources and support to seamlessly integrate telehealth into their practices without financial risk or penalty.
Despite the real competitive threats, Teladoc remains a major player in this evolving field of medicine. If you’re an aggressive investor, TDOC stock is a speculative buy. However, buyer beware.
On the date of publication, Will Ashworth 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.
