Investors loved Teladoc Health (TDOC 3.51%) during the earlier stages of the pandemic. The company posted triple-digit gains in revenue and online medical visits. And investors flocked to the shares. Teladoc climbed about 250% from the start of 2020 through early last year.
Since then, though, some think the telemedicine giant has lost its luster. The company’s growth has slowed. And it reported two noncash billion-dollar goodwill impairment charges within just a few months. This year, the stock has declined about 60%.
So, your feelings about Teladoc may be pretty negative right now. But before you turn your back on this stock, hold on. I’ve got 20 words that could completely change your opinion of Teladoc.
These words come from CEO Jason Gorevic. During the second-quarter earnings call on July 27, he talked about the company’s pipeline. This refers to the potential contracts Teladoc aims to sign with companies and other customers. Teladoc sells telehealth packages to employers. And they offer these to their employees.
Teladoc has “twice as many multimillion-dollar deals in the pipeline as we did as we entered the third quarter last year,” Gorevic said. The current pipeline and the later-stage one also are up 20% in terms of number of deals compared to the year-earlier period, he added.
So, why is Teladoc’s revenue growth weaker than it was even a quarter ago? Companies are taking longer to sign up for healthcare services. That’s due to the current economic situation, Teladoc says. Benefits managers are being extra cautious as they review new contracts. And reductions in the workforce at certain companies have kept management busy — turning attention away from finalizing contracts for health plans.
All of this pushes revenue farther off into the future. As a result, Teladoc’s revenue is coming in slower than the company — and investors — had hoped.
Of course, we all would like to see Teladoc rapidly signing new contracts and broadening others. But the fact that this isn’t happening isn’t linked to the quality of Teladoc’s packages — it’s due to external factors. And these problems are temporary. That’s good news.
Demand for Teladoc’s services
Now let’s take a second look at Gorevic’s words. They show us demand for Teladoc’s services is there, and it’s stronger than ever. Teladoc even said it expects one of its larger health plan partners to offer the Teladoc primary healthcare service, Primary360, to more of its customers.
All of this means that, in spite of Teladoc’s near-term woes, the company has what it takes to keep growing two key metrics. I’m talking about number of U.S. paid members and revenue per member. These measures climbed 8.8% and 13%, respectively, in the second quarter. Both are necessary for revenue growth over time.
What does all of this mean for you as an investor? Whatever your investment style, you may take a more optimistic view of Teladoc after considering Gorevic’s comment. But investment decisions depend on your risk tolerance.
If you’re a cautious investor, you still may want to wait before picking up shares of Teladoc. The economic pressures may continue to put the brakes on Teladoc’s growth in the months to come. And investors might not flock to this stock overnight. You might decide to put Teladoc on your watch list and hold off for another quarterly report or two before taking action.
But if you’re more of an aggressive investor, now could be a good moment to get in on this beaten-down but promising stock. Gorevic’s words show us potential customers are waiting in the wings. And that could lead to revenue and share price growth down the road.
Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Teladoc Health. The Motley Fool has a disclosure policy.