Down 80%, should contrarian investors buy Teladoc shares?

The stock market has been punishing growth investors lately. High inflation, rising interest rates and the war in Ukraine have rattled financial markets around the world, forcing investors to exit positions in high-growth companies and flock to equity- and bond-oriented stocks. the value. One stock that has been particularly crushed is Teladoc Health (TDOC 4.88%).

The virtual healthcare provider, which has seen high demand during the heat of the pandemic, has plunged 80% in the past year. Between unfavorable macroeconomic conditions, a few weak earnings reports and uncertainty about the company’s future in a post-pandemic world, Teladoc continues to face a wide range of challenges. But since most investors are no longer in love with the stock, I think it’s time to take a look at the telehealth company.

On that note, should investors buckle up and buy Teladoc stock today? Let’s dive in to see why or why not.

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Where is Teladoc today?

Teladoc’s last two earnings reports have disappointed investors to say the least. In its latest quarter, the telehealth leader increased total sales 24.6% year-over-year to $565.4 million, in line with analysts’ estimates, but the company shocked investors with its net loss of $41.58 per share, which was primarily due to a non-goodwill impairment charge of $6.6 billion. Management also cut its guidance for the year, with total revenue for fiscal 2022 now expected to be between $2.40 billion and $2.50 billion, down from its original range. from $2.55 billion to $2.65 billion provided at the end of 2021. Similarly, management estimates that its net income loss will be approximately $43 per share.

Wall Street still expects total sales to climb 19.6% year-over-year to $2.43 billion, representing solid growth, but investors should keep a close eye on management’s ability to execute its forecasts in the coming quarters. Even so, there were several bright spots in Teladoc’s first quarter earnings release. Total visits jumped 34.9% year-over-year to 4,510, demonstrating the company’s ability to grow despite the reopening of the economy, and average revenue per member increased. grew 20.6% to $2.52 for its 54.3 million US members. And with $836.4 million in cash and cash equivalents and a debt-equity ratio of just 17.6%, Teladoc is well positioned to weather any short-term economic storm.

The stock is currently trading at 2.3 times forward sales, which seems more than reasonable given its future prospects. According to Precedence Research, the global telehealth market is expected to grow at a compound annual growth rate (CAGR) of 18.8% through 2030, to $225 billion. As an industry leader, Teladoc stands to benefit immensely from this secular growth trend in the years to come.

A risky game with huge upside potential

For interested investors, now is a good time to buy shares of Teladoc, but it certainly comes with a lot of risk. Management visibility has not been great in recent quarters, which is a bad sign for investors. At the same time, the virtual healthcare industry is still in its infancy and Teladoc has been a key player as a market pioneer so far. I’m not suggesting buying tons of stocks today, but I think it deserves a modest position at current levels.