Can Teladoc ramp up subscribers to lift shares post-Q4 earnings?

Teladoc’s virtual health offering sprang during the pandemic, but as restrictions ease, its share price has tumbled as subscriber additions tapered. Competition from Amazon Care could further hurt the Teladoc share price.

Telemedicine provider Teladoc Health [TDOC] is expected to post a 43% rise in revenue from the year-ago quarter and a decline of 118.5% in earnings year-over-year when it releases its fourth-quarter (Q4) and 2021 full-year figures on 22 February. While organic growth in revenue continues margins are hurting because of high general expenses and cost of customer acquisition.

Teladoc’s shares have been trading down ahead of its upcoming Q4 results, but the stock could rise if the company’s losses reduce.

Analysts at Zacks forecast fourth-quarter revenue to come in at $548.25m, an increase from the £383.3m delivered in the year-ago quarter, while earnings per share are expected to be a quarterly loss of $0.59, significantly worse than the loss of $0.27 posted in the same period in 2020.

Jason Gorevic, CEO of Teladoc, said, “The third quarter was notable in expanding relationships with a number of leading national health plans.” These are targeted at the primary healthcare market.

Teladoc shares dip

The Teladoc share price has tumbled by 29.2% year-to-date, while the US market benchmark S&P 500 has declined by 8.7% over the same period.

The telemedicine company has been hit by the broader tech selloff in 2022, with many investors concerned over surging US inflation and the prospect of multiple interest rate rises.

Even star stock picker, Cathie Wood, who holds Teladoc in her $12bn ARK Innovation Fund, has seen her portfolio weighed down heavily by these same fears. Wood, who became a household name by betting on high-growth stocks during the coronavirus pandemic, has seen investors pull almost $148m from her flagship fund for the year-to-date through 2 Feb, according to Lipper data.

Can Teladoc’s pandemic success continue?

Teladoc became a pandemic winner as Covid-19 forced many to resort to telemedicine during the various lockdowns, with real-life doctor’s visits difficult or daunting. However, its shares have come under pressure as investors worry whether the number of people using the telehealth service will continue as the virus abates.

The firm operates a subscription-based business and is the leader in its field, but it remains to be seen whether Teladoc can continue to be successful when consumers are able to freely decide between telemedicine and in-person healthcare after Covid-19 restrictions are fully lifted.

The company’s paid members in the US, its largest market by revenue, already saw sluggish growth of 2% year-over-year to 52.5 million in the third quarter. Teladoc forecast its US paid membership in the range of 52.5 million to 53.5 million members in Q4, which would represent a marginal uplift from the previous quarter.

However, at the Q3 results, Gorevic said patients were “increasingly relying on Teladoc Health’s virtual care” despite waning restrictions. The company has added specialties like mental-health support, a submarket of telemedicine, and dermatology to expand its reach.

Challenges ahead

Teladoc faces increased competition, with more companies entering the telehealth space, including Talkspace, which focuses on counselling and therapy. Ecommerce giant Amazon [AMZN] announced earlier this month that it is entering the market by expanding its telehealth service, known as Amazon Care, throughout the US.

The telemedicine provider has yet to be profitable, and costs to run its platform have been increasing. Teladoc expects Q4 revenue to be in the range of $536m to $546m, while it estimates net loss per share to be in the region of $0.73 and $0.53.

Teladoc’s challenges come after it completed its merger with Livongo in October 2020 to create a digital health powerhouse and completed its acquisition of InTouch Health in July of that year.

Are analysts downgrading Teladoc shares?

While 11 out of 30 analysts rate Teladoc shares a ‘buy’, according to MarketScreener, some have reduced their price target. Deutsche Bank has maintained its ‘hold’ rating but lowered its price on the stock from $163 to $81.

Investment bank Jefferies also reiterated its ‘hold’ rating, but adjusted its price target on Teladoc from $113 to $82 per share.