Why Teladoc Stock Soared 25% in July but Is Down 19% in August


What happened

Shares of telehealth leader Teladoc Health (NYSE:TDOC) surged 24.5% in July, according to data from S&P Global Market Intelligence. For context, the S&P 500 returned 5.6% last month.

However, the stock has given back most of July’s gain already this month. It fell 18.5% in the first week of August. Nonetheless, it’s still up a whopping 131% so far in 2020, compared with the broader market’s 4.9% return, making it a top performer among large caps (stocks with market caps of at least $10 billion).

Person's hands holding a cell phone which has a young male doctor on the screen.

Images source: Getty Images.

So what

July  

We can attribute Teladoc stock’s strong performance last month in part to a continuation of the momentum it’s experienced since earlier this year, driven by the COVID-19 pandemic. The crisis has caused a surge in the number of people consulting with healthcare providers virtually rather than in person.

There was also a specific catalyst last month: The company’s July 29 release of second quarter results that pleased investors. Shares popped 8.6% the following day.

In the second quarter, Teladoc’s sales soared 85% year over year to $241 million, driven by a 203% year over year (and 38% sequential) increase in total visits to more than 2.7 million. Revenue easily topped the $220.7 million Wall Street consensus estimate.

Net loss narrowed 12% to $25.7 million, which translated to net loss per share narrowing 17% to $0.34. Excluding a $0.10 charge associated with the company’s May 2020 convertible debt offering, loss per share was $0.24. This result was essentially in line with analysts’ expectation of a $0.23 net loss.

August

We can attribute Teladoc stock’s poor start to this month to some investors not being pleased with the company’s Aug. 5 acquisition announcement. In an all-stock deal, Teladoc plans to acquire Livongo Health (NASDAQ:LVGO), which provides digital tools aimed at helping people with diabetes and other chronic conditions improve their health.

Teladoc stock plunged 19% on the day of the acquisition announcement and moved 22.3% lower in the three-day period (through Friday, Aug. 7) following the news.

There are probably at least a couple reasons for the market’s reaction. Some investors might not think the pairing is adequately synergistic, while some don’t like that their ownership will be diluted by the issuance of additional shares. 

TDOC Chart

Data source: YCharts.

Now what

For full-year 2020, Teladoc management has guided for total revenue growth of 77% to 80% year over year, which includes organic revenue growth of 65% to 68%. The organic revenue growth forecast doesn’t include the contribution from InTouch Health, a hospital-based telemedicine company acquired by Teladoc on July 1.

For 2020, management also expects a loss per share between $1.45 to $1.36, representing loss per share expanding 5% to narrowing 1% from 2019. 

The 2020 total revenue and earnings outlooks don’t include the impact from the acquisition of Livongo Health. If this deal goes through and closes by year-end, investors can expect Teladoc management to update its guidance.

 





Source link

Leave a Reply

Your email address will not be published. Required fields are marked *