It isn’t the must-buy stock that it was in 2020.

Considering it was one of the pandemic’s biggest market winners, Teladoc Health ‘s ( TDOC 1.14%) stock looks remarkably run-down right now. Over the last three years, its shares have seen their value fall by 50%, dramatically underperforming the market’s gain of more than 40%. That’s enough to make many investors start to look for the door — but it’s also the kind of dip that attracts bargain hunters and contrarians.

So is this company worth buying, or is Teladoc’s time as a growth stock in the limelight now part of a quickly receding past? To get some more clarity on this topic, let’s discuss a couple of arguments in favor of starting a position, and then two arguments in favor of selling or shorting the stock. Buy reason No. 1: Memberships and revenue per member are still growing

Teladoc’s business model is to provide telemedicine services to its customers — insurance companies, other businesses, and individuals. It collects subscription fees from its clients every month, and then uses the revenue to pay its clinicians and other staff.

It shouldn’t be surprising to hear that the key to making its model work is for it to bring in more money from a customer’s fees than it spends on providing care to the individuals who are covered under the customer’s plan. And on that metric, Teladoc is (slowly) improving.

In the second quarter of 2021, it averaged $2.31 in revenue per member. A year later, it averaged $2.60, an increase of more than 12%. The company still isn’t profitable, but the numbers are a positive sign that its services are generating more income per subscriber than before, as they point to improving unit economics.

Furthermore, the company grew its base of members from 52 million to 56.6 million in the same period, which is quite good considering that the pandemic-era gold rush for telehealth is long over.

If Teladoc can continue to develop new services to generate more revenue per member, it could eventually grow and be profitable. Its early steps down that road constitute a decent reason to buy the stock. Buy reason No. 2: The valuation is far better than it used to be

Teladoc’s valuation is becoming a lot more reasonable in comparison to its recent heights, and might even be approaching bargain territory.

At the end of December 2020, its ratio of enterprise value (EV) to revenue was a sky-high 77.8. Now, it’s only 2.5. That means investors are significantly less enthusiastic about paying for the amount of sales the company is reporting today, in light of its debt and its number of shares outstanding. And for those who expect it to be a good investment in the long term, rock-bottom expectations in the present make for a great buying opportunity.

Now that you’re up to speed on two reasons Teladoc stock might be worth buying, let’s take a look at a pair of points that support why it might be better to sell your shares. Sell reason No. 1: 2022 is going much worse than initially expected

Despite its attractive valuation and recent progress in expanding its membership base and income per member, the telehealth provider’s 2022 isn’t going remotely according to plan — to the point where it could be undermining many investors’ long-term theses for its performance.

In the second-quarter earnings update, management massively slashed guidance for the year. Whereas at the start of the year Teladoc was planning for net losses per share to be as much as $43.50, after an abysmal first half its adjusted guidance now calls for net losses of between $61 and $62 per share.

Management blames a combination of “trends in the market” and “uncertainty” caused by the evolution of the pandemic and its associated economic turbulence. Given that there isn’t much indication that either of those two factors are going to change in the near term, the lackluster performance could make Teladoc shares worth selling. Sell reason No. 2: It probably will never have 2020 levels of growth again

Teladoc was quite a lucrative stock to own in 2020, when people turned to telehealth to avoid exposure to the coronavirus at overburdened hospitals and clinics. Revenue burgeoned, as did the company’s membership base and the popularity of its brand. At the end of 2019, it had only 36.7 million members, and by the end of 2020, it had more than 51.8 million.

But now that people can go to their doctors in person without as much […]

source 2 Reasons to Buy Teladoc Health Stock, and 2 Reasons to Sell

editor Stocks

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