Re: OUCH!!
TDOC -- ARK Commentary:
Teladoc (TDOC)
Shares of Teladoc, the world’s largest global digital health platform, fell roughly 40% on Thursday after its quarterly earnings report. For perspective, Teladoc previously traded at these levels when it was cashflow negative in 2017. Compared to 2017, its visit volumes are 5x higher, its paid member count is twice as high, annual revenue is 5x higher, it is cashflow positive, and 1 in 6 Americans is a full Teladoc member. The primary reason for Teladoc's sudden stock decline seems to have been its 25% reduction in 2022 AEBITDA* guidance, the result primarily of higher customer acquisition costs in one of its Direct-To-Consumer (DTC) mental health channels. Since COVID-19 began, Teladoc has increased AEBITDA by more than 650% and doubled its AEBITDA margin, boosting its cash position to ~$900 million.
Our five-year thesis for Teladoc is built around the company's transition from a general telehealth provider to a B2B enterprise solution for whole-person healthcare. To measure the company's progress, we track utilization––which has increased 160% since 2019––multi-service adoption––which has increased from 67% to 78% over the past year––and competitive wins. One recent example is its new contract with Northwell, New York's largest health system, which Teladoc won from a competitor based on its multi-faceted platform.
That said, given the tumultuous market dynamics in digital care, management would have served shareholders and other stakeholders better with a strategy of under-promising and over-delivering. Nonetheless, we do believe that Teladoc’s long-term competitive position and product differentiation are unmatched, gearing it for superior growth over the long term.
*AEBITDA = Adjusting for non-cash, stock-based compensation, which has booked almost entirely from the Livongo transaction