Teladoc (TDOC) Up 18% Since Last Earnings Report: Can It Continue?

It has been about a month since the last earnings report for Teladoc (TDOC). Shares have added about 18% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Teladoc due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Teladoc Q4 Loss Narrower Than Expected, Revenues Beat

Teladoc Health, Inc.’s fourth-quarter 2019 loss of 26 cents per share, narrower than the Zacks Consensus Estimate of loss of 33 cents per share.

The reported figure was also narrower than the year-ago quarter’s loss of 35 cents per share. The improvement was primarily due to strong revenue growth, stemming from increased demand for the company’s service offerings.

Behind the Headlines

The company’s operating revenues of $156 million surpassed the Zacks Consensus Estimate by 1.76% and rose 26.8% year over year. The upside can be attributed to the strong performance of its revenue components — subscription access fees and visit fees.

Revenues from subscription access fees (which comprised 81% of total revenues) increased 24% year over year to nearly $127 million. Within this, subscription fees from the United States accounted for $98.1 million or 77% of total access fees (up 25% year over year), while international subscription fees accounted for the remaining 23% or $28.9 million (up 19%).

The company generated $29.5 million in visit fee revenues from general and medical visits, representing an increase of 47% year over year.
Gross margin declined to 64.6% from 67.4% in the year-ago quarter as a result of an overall revenue mix shift of its virtual healthcare offerings.

Total visits of 1,239,000 were up 44% year over year on membership gains in U.S. visit fee only and international visits.

For 2019, U.S. paid membership of 36.7 million grew 61.1% year over year.
Total expenses in the quarter were $172.1 million, representing a rise of 22.4% year over year, primarily led by higher marketing and advertising, technology and development, legal and regulatory, and general and administrative expenses.

Adjusted EBITDA was $15.2 million for the quarter, soaring 162.1% year over year.

Financial Update

As of Dec 31, 2019, the company had $517.1 million in cash and short-term investment, up 8.1% from the 2018 end level.

Total debt as of Dec 31, 2019, was $440.4 million, up 6.2% from the level as of Dec 31, 2018.

Yearly Update

For 2019, total revenues were $553.3 million, up 32% year over year. Net loss per share of $1.38 per share was narrower than the prior-year loss of $1.47.

1Q20 Update

For the first quarter of 2020, the company expects total revenues of $169-$172 million and total adjusted EBITDA of $9-$11 million. It projects total visits between 1.4 million and 1.6 million. Net loss per share is expected to be 34-37 cents per share.

2020 Outlook

For 2020, the company expects revenues between $695 million and $710 million, and adjusted EBITDA between $60 million and $70 million. It projects the total U.S. paid membership of 43-45 million, while visit fee only access will likely be available to 19-20 million individuals.
Total visits are expected to be 5.5-5.9 million and net loss per share is expected to be $1.06-$1.19.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month.

VGM Scores

Currently, Teladoc has a strong Growth Score of A, a grade with the same score on the momentum front. However, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Teladoc has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.