Teladoc’s stock surged by 11.9% on Tuesday, outperforming the broader market indices. The rally was triggered by a positive analyst report from Jefferies, which raised the price target for Teladoc shares from $8 to $10. Analyst Glen Santangelo maintained his buy recommendation on the stock, citing a notable turnaround in the performance of Teladoc’s BetterHelp brand.
Web traffic for the BetterHelp site experienced year-over-year growth in July and August, following a 12-month period of declining numbers. Santangelo expects the BetterHelp unit to outperform current analyst consensus, which projects a revenue decline of 11% year-over-year for the third quarter. However, he cautioned that some estimates for Teladoc’s earnings before interest, taxes, depreciation, and amortization (EBITDA) might be “modeled somewhat aggressively” due to “outlier” estimates by certain analysts.
Despite these concerns, Santangelo considers Teladoc to be a good discount buy, particularly given the extremely negative investor sentiment, as indicated by the relatively high short interest of around 16%.
Teladoc surges after analyst report
Teladoc’s shares have been highly volatile over the past year, with 20 moves greater than 5%.
The company’s biggest move was a 24.7% drop following missed fourth-quarter revenue estimates and disappointing revenue guidance for the next quarter and full year. The company provided a three-year growth outlook, expecting low to mid-single-digit top-line growth driven by mid-single-digit growth in the Integrated Care (IC) segment and low single-digit growth in the BetterHelp business. Teladoc acknowledged that most of the revenue growth in its IC segment would be driven by its chronic care products, as the U.S. virtual care business, which represents half of the IC segment, is expected to grow in the low single-digits range.
Teladoc’s stock has been under pressure this year, down 59.3% since the beginning of the year. At $8.94 per share, it is trading 59.6% below its 52-week high of $22.10 from December 2023. Investors who bought $1,000 worth of Teladoc shares five years ago would now be looking at an investment worth $130.06.
