Telemedicine champ Teladoc Health (NYSE:TDOC) is filling a much needed gap. And today’s business reflects that healthy demand. And moving past a gloomy June, a nearby TDOC stock purchase may finally offer a solution for ailing portfolios.
Teladoc quickly rose to prominence in 2020. And for good reason. The company’s virtual platform offered healthcare services for individuals seeking medical attention during the Covid-19’s first year and that might otherwise have been impossible to receive.
But a feverish “stay-at-home” stock binge by Wall Street that included Teladoc, Zoom Video (NASDAQ:ZM) and Peloton (NASDAQ:PTON) among others, crippled many TDOC stock investors. And fairly, it wasn’t without cause.
From Covid’s broad-based March 2020 bottom, shares ballooned from a valuation of around $10 billion to a much heftier peak market cap of nearly $45 billion in less than a year. In that moment TDOC was a prescription for investor pain, despite the fact that it was still bleeding through cash and unprofitable and coupled with a lofty sales multiple of about 20x.
Today though, shares are off nearly 90% from that level. With that in mind, take a closer look at TDOC stock to see if it’s worth buying now.
Teladoc’s Vital Signs Are Healthy
There are two sides to every story. And when it comes to Teladoc, bears will correctly point to the company being a direct-to-consumer beneficiary of the Covid pandemic.
Yet, while we’ve come a long way from lockdowns in the U.S. and other social distancing precautions that thrust TDOC into hyper-growth stock stardom, TDOC’s virtual telemedicine services were already on the rise. The pandemic was simply a one-off booster shot.
Looking past the negative “good for Covid-only” narrative, Teladoc’s business continues to grow. In fact, the company’s first quarter revenues climbed by 25% over 2021’s results to $565.4 million on the back of rising demand for its suite of products and services.
With help from Wall Street’s bear market, Teladoc shares trade at a reasonably attractive 4.5 times this year’s sales and roughly half of the 9x figure Teladoc fetched in 2019 prior to Covid.
There’s a lot more to like about TDOC stock now. That’s especially true given its healthy cash position, operations which are now cash flow positive and the fact that Teladoc is forecasted to grow revenues at 38.60% CAGR the next couple years within a recession-resistant healthcare industry.
TDOC Stock Is Stabilizing
Source: Charts by TradingView
Technically, there’s reason to be bullish on TDOC stock as well. Stabilization in shares is building the case for an upside opportunity with a skewed risk-to-reward profile for buyers.
As part of Teladoc’s massive bear market, the monthly chart reveals two significantly tighter range doji decision candlesticks have formed in May and June. Bullishly, the pattern rests on TDOC’s initial all-time-high from 2015 and former saucer pattern, which appear to be acting as support.
Should shares stage a candlestick breakout, which could occur as soon as July, the price action would be reinforced if Teladoc clears downtrend resistance that’s modestly above the doji pattern.
Longer-term, TDOC stock could make new highs. However, that would require considerably more growth over the next several years. Even then, there are no guarantees. But don’t expect Teladoc’s ambitiously hellbent peak valuation to be surpassed by another period of excessive optimism similar to 2020.
Still, more sensible stock gains could be significant and a worthwhile proposition for buyers to participate in.
TDOC Stock Price Target: $55
My guess is if TDOC can continue to deliver growth over the next couple of quarters and Wall Street is in a slightly less bearish state of mind, Teladoc could return to a $10 billion and “back where we started” sort of valuation.
Compared to today’s $6 billion market cap, valuing shares where they were at TDOC’s March 2020 bottom points to a price target of $55. I’m not alone in thinking that either. Today, that forecast is sandwiched in-between the street’s median 12-month estimate of $42 and range high of $65 a share.
If conditions were to become slightly more confident but not completely unhinged by optimism over the next 12 to 18 months, a bullish cycle could extend up toward $90 to $100 before technical resistance and valuation concerns might come into play.
Regardless, should TDOC stock begin to make good on the price chart’s promising bottom, I’d advise starting a long campaign in shares with a structured married put to start or an actively managed, fully hedged collar for the more disciplined and even-keeled buyers out there.
On the date of publication, Chris Tyler 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.