Teladoc (TDOC) Falls 6% on Growing Losses and Weak Guidance to Prompt a Downgrade to 'Hold' at Deutsche Bank
Shares of Teladoc Health (NYSE: TDOC) are down more than 6% in today’s trading session after the company presented disappointing Q2 results.
The company reported a loss of $0.86 per share while the surveyed analysts were expecting a loss of “just” $0.53 per share. Losses have more than doubled compared to $0.34 a year ago. Revenue grew 109% year-over-year to $503 million.
“Teladoc Health delivered a strong second quarter, marked by exciting new client wins, product launches, and tremendous progress on our quest to be the category-defining provider of whole person virtual care,” said Jason Gorevic, chief executive officer of Teladoc Health.
“We have solid momentum heading into the second half as the market embraces the unified care experience that only Teladoc Health has the breadth and scale to achieve.”
Despite the positive commentary from the CEO, the company also disappointed on the guidance front. TDOC is projecting sales between $2 billion and $2.03 billion, a bit higher than analysts’ estimates of $2.01 billion.
However, Teladoc is calling for losses of $3.35-$3.60 per share on a full-year basis, worse than the $2.84 expected from surveyed analysts.
Following a Q2 print, Deutsche Bank analyst George Hill downgraded shares to “Hold” from “Buy” and slashed the price target to $153.00 per share from $225.00.
“Organic revenue growth was in the 40% range backing out acquisition from the last 12 months. We view this figure as impressive given the utilization spike in Q2-20 from the earliest stages of the Covid-19 crisis,” the analyst wrote in a note, before adding:
“However, membership growth was up only 1% y/y as the company was in execution mode around service delivery and total visits were up 27.5%. These visits were weighed towards members with subscription access. Profitability was worse than expected as core EBITDA was ($59mm) and stock comp continues to be an eye-watering figure. Teladoc announced new deals with HCSC, provided details on its partnership with Microsoft and updated its new chronic care membership figure. Despite the continued progress against its growth objectives, the aftermarket performance leads us to believe there is little the company can do in the near term to meet lofty investor expectations.”
Cantor Fitzgerald analyst Steven Halper has opted to stay on the sidelines with his “Neutral” rating but lowered the price target to $185.00 per share from $210 on weak guidance.
“Most operating metrics were strong as the company continues to execute its virtual care strategy. While virtual health clearly benefited from COVID, we connue to expect utilization levels to stabilize above pre-COVID levels as virtual health is now more commonplace,” Halper wrote in a note on TDOC.
Although he acknowledged the company’s continued growth, he believes the current market valuation is lofty and shares are simply “expensive.”
“On an EV/adjusted EBITDA basis (using our 2022 estimates), the company is currently valued at over 60x. We have reduced our price target to $185 based on slightly lower growth and margin expectations in our DCF model. On the whole, our estimates remain aggressive, albeit slightly less so after our revisions,” he concluded.
Overall, at least 12 Wall Street analyst cut their price target on the stock following the results.