Why Teladoc Health Was a Sickly Stock This Week

What happened

The S&P 500 generally had a good trading week over the past five working days, but we can’t say the same about Teladoc Health (TDOC 3.51%) stock.

The healthcare teleconferencing specialist’s shares were knocked by disappointing quarterly results, an unhappy development compounded by a slate of analyst recommendation downgrades and price target cuts. According to data compiled by S&P Global Market Intelligence, Teladoc fell by almost 11% across the week.

So what

Teladoc unveiled its second-quarter results on Wednesday, and many investors immediately reached for the aspirin.

Although the company beat the average estimate for revenue, it fell well short of bottom-line expectations by reporting a deep headline net loss. This was due to a goodwill impairment charge of $3 billion related to its 2020 acquisition of Livongo. Although this is basically an accounting loss, it doesn’t make the chronically loss-making company’s financials look particularly appealing. Weak guidance also didn’t help.

It wasn’t only investors who were turned off by this performance. A platoon of analysts following the specialty healthcare stock dimmed their view of its prospects, with two going so far as to downgrade their recommendations.

One downgrader was Needham & Company’s Ryan McDonald, who now tags the company as a hold; previously he rated it a buy. McDonald feels the company is in for more pain, writing in a new analyst note that declines in consumer discretionary budgets will affect Teladoc’s BetterHelp service, and macroeconomic uncertainty and inflation will also negatively affect results.

Now what

Never mind this week — Teladoc has been a dog of a stock so far this year generally, losing over half of its market value. While investors are willing to accept bottom-line losses as long as growth remains hot, many are concerned that this company’s is slowing. That pricey Livongo acquisition, meanwhile, continues to be somewhat of an albatross around the company’s neck.

 

Eric Volkman 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.

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