This year has been an absolute nightmare for Teladoc Health (TDOC 3.51%), the telehealth provider aiming to disrupt the traditional healthcare industry. Year to date, the stock has nosedived 62%, slumping most recently because of its second-quarter earnings report that it posted on July 27.
To make matters worse, technology giant Amazon.com (AMZN 10.36%) recently announced its plan to acquire One Medical for $3.9 billion in an all-cash transaction. Although the deal has yet to be approved, acquiring One Medical, which falls under the 1Life Healthcare (ONEM -0.12%) umbrella, could significantly boost the e-commerce leader’s push into the virtual healthcare arena.
Now with its back against the wall, is Teladoc Health a stock that investors should consider pouncing on at existing price levels?
Teladoc’s financials and Amazon’s potential acquisition
In its second-quarter outing, Teladoc Health grew revenue by 17.7% year over year, to $592.4 million, but what flustered investors was its net loss of $19.22 per share, which was driven by a non-cash goodwill impairment charge of $3 billion. This comes after a similar $6.6 billion goodwill impairment charge in the first quarter, which resulted in a net loss of $41.58 per share. In terms of other key operating metrics, total visits on the platform rose 27.6% year over year to 4.7 million, and the average revenue from its 56.6 million paid U.S. members climbed 12.6% to $2.60 per member.
Although management maintained its previously issued guidance for revenue and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA), they now expect results to be toward the lower bound of those ranges due to ongoing macro conditions. Thus, for the full year, management forecasts total revenue of $2.4 to $2.5 billion, indicating 18.1% growth year over year if it meets the lower end. And it expects adjusted EBITDA to reach $240 million to $265 million, equal to a 10.4% decline if, once again, it hits the lower bound.
Although those aren’t necessarily horrible growth rates, management’s lack of visibility around the company’s business in recent quarters should be of great concern to investors moving forward.
To add fuel to the fire, Amazon announced on July 21 a plan to acquire One Medical for $3.9 billion in an all-cash transaction. One Medical is a membership-based primary care provider with almost 200 locations and roughly 770,000 patients nationwide. If the deal is approved, Amazon’s healthcare footprint will become significantly larger, which could serve as a major threat to Teladoc.
Is now an optimal time to buy Teladoc stock?
For several quarters now, Teladoc’s management has lacked visibility of the business, which is extremely concerning from an investor’s standpoint. And while buying at today’s lows could lead to monstrous returns down the line, I’d like to see a bit more consistency on the operational front before pulling the trigger.
So, even though the telehealth pioneer is trading at just 3.2 times sales right now, its fresh underperformance, combined with intense competition from the well-funded tech giant, makes it a dicey play at the moment. While the opportunity in the telehealth market is massive, I think there are better investments available to investors now.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Luke Meindl has positions in Teladoc Health. The Motley Fool has positions in and recommends Amazon and Teladoc Health. The Motley Fool has a disclosure policy.