What Happened: Shares of digital medical services platform Teladoc Health (NYSE:TDOC) jumped 5.8% in the afternoon session after stocks rebounded following Fed Chair Jerome Powell's second day of testimony to the Senate Banking Housing and Urban Affairs Committee. The Nasdaq rose more than 1.5%, while the S&P 500 gained 0.89%. Besides this, we have found no other fundamental or rate-related reasons explaining the improved market sentiments.
The Fed Chair's speech largely reiterated the previous guidance as the FOMC (Federal Open Market Committee) is expected to continue to use data to inform its monetary policy decisions.
The Fed Chair added, "In considering any adjustments to the target range for the policy rate, we will carefully assess the incoming data, the evolving outlook, and the balance of risks...The Committee does not expect that it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent."
The Fed Chair also highlighted the possibility of rate cuts this year, which is in line with market expectations, saying, "We believe that our policy rate is likely at its peak for this tightening cycle. If the economy evolves broadly as expected, it will likely be appropriate to begin dialing back policy restraint at some point this year."
As a reminder, the driver of a stock's value is the sum of its future cash flows discounted back to today. With lower interest rates, investors can apply higher valuations to their stocks. No wonder so many in the investment community are optimistic about 2024. We at StockStory remain cautious, as following the crowd can lead to adverse outcomes. During times like this, it's best to own high-quality, cash-flowing companies that can weather the ups and downs of the market.
Is now the time to buy Teladoc? Find out by reading the original article on StockStory.
What is the market telling us: Teladoc's shares are very volatile and over the last year have had 24 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 15 days ago, when the stock dropped 24.7% on the news that the company reported fourth-quarter results that missed analysts' revenue estimates. Looking ahead, revenue guidance for the next quarter and full year also missed consensus estimates. While adjusted EBITDA guidance for the next quarter fell below expectations, full-year guidance came in ahead. The company provided a three-year growth outlook with expectations for low to mid-single-digit top-line growth, driven by mid-single-digit growth in the IC (Integrated Care) segment and low single-digit growth in the BetterHelp business.
Teladoc acknowledged that with most U.S. customers already accessing virtual healthcare services, revenue growth from the U.S. virtual care business, which represents half of the Integrate Care segment, will be in the low single-digits range. This implied that Teladoc expects most of the revenue growth in its IC segment to be driven by its chronic care products. Overall, this was a weaker quarter for the company, with markets likely worried given the underwhelming growth outlook.
Teladoc is down 29.8% since the beginning of the year, and at $15.39 per share it is trading 48.3% below its 52-week high of $29.77 from July 2023. Investors who bought $1,000 worth of Teladoc's shares 5 years ago would now be looking at an investment worth $259.44.
