It’s time to perform a checkup on virtual healthcare service provider Teladoc Health (NYSE:TDOC). The prognosis doesn’t look great, as Teladoc is reportedly implementing a sizable staff reduction. Sometimes the market takes a favorable view of job cuts, but today TDOC stock is firmly in the red.
Teladoc Health started falling out of favor on Wall Street in early 2021 as the Covid-19 pandemic catalyst faded. Additionally, investors rotated out of technology stocks in 2022, making matters worse for Teladoc and its shareholders.
It was almost inevitable that Teladoc would have to take strong action in order to reduce its expenditures. Numerous other tech firms have slashed their headcounts, and Teladoc is part of this growing trend. Specifically, a Form 8-K reveals Teladoc plans to trim its workforce by roughly 6%, which would equate to around 300 jobs.
What’s Happening with TDOC Stock?
The market’s response to this announcement was immediate and not positive. TDOC stock was down more than 5% by 11 a.m. Eastern today.
The Form 8-K refers to a “restructuring plan” that’s intended to cut costs. However, slashing jobs can actually have a short-term impact of increasing expenditures.
In Teladoc’s case, the company’s fourth-quarter 2022 cost-saving actions resulted in “approximately $2 million in costs related to employee transition, severance payments, employee benefits, and related costs, and approximately $2.4 million in exit costs associated with the office space reductions.”
Teladoc’s current restructuring plan for 2023 will also be expensive. The company anticipates around $17 million in pre-tax charges this year, resulting from Teladoc’s restructuring efforts.
Actually, it could be even worse than that. Teladoc acknowledges that it might “incur other charges or cash expenditures not currently contemplated due to unanticipated events that may occur.”
So, investors are probably imagining worst-case scenarios in the near term as Teladoc attempts to cut its costs for the long term. Teladoc’s workforce reduction might benefit the company’s balance sheet eventually. Today, however, TDOC stock traders aren’t quite ready to give Teladoc a clean bill of health.
On the date of publication, David Moadel 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.