Teladoc stock plummets this week: Here’s why

shares of Teladoc Health (TDOC -5.26%) It has plunged more than 30% this week, according to data from S&P Global Market Intelligence. The telemedicine provider announced slower revenue growth, higher operating losses and a poor outlook for 2024 in its 2023 earnings release. After Teladoc stock’s meteoric rise in 2020, investors are pushing the stock lower.

The pandemic-era favorite stock is now down 95% from its all-time high. That means for every $100 invested at the stock’s peak, only $5 is left today.

Slow growth, unprofitability

Teladoc’s revenue for the fourth quarter was $661 million, well below analysts’ expectations of $671 million. Revenue grew just 4% in the quarter, but the company continues to lose money. Teladoc posted an operating loss of $250 million for the full year of 2023, despite multiple quarters of cost reductions.

There was no guidance to save it. Teladoc’s revenue forecast for the first quarter of this year is between $630 million and $645 million, well below analysts’ expectations of $673 million. The company has spent billions of dollars acquiring other telemedicine platforms such as Livongo and BetterHelp, but it has not seen much growth in healthcare consumers, except during the pandemic lockdown period when people were forced to look for digital solutions. It has not yet gained much support among the public.

For example, in 2023, Teladoc spent nearly $700 million on marketing and more than $200 million on sales staff. This only increased revenue from his $2.4 billion to $2.6 billion, which is highly inefficient. Teladoc has not proven that it has a suite of products that people or health insurance companies actually want to use. At the very least, it cannot be operated profitably.

If not now, when will the benefits be realized?

Even worse for Teladoc shareholders may have been three years of leadership. Management is seeking only mid-single-digit (5%) sales growth and modest profit expansion over the next few years, meaning operating losses are likely to continue. Shareholder dilution continues, with shares outstanding increasing 366% over the past 10 years. This makes it very difficult to generate value per share.

Despite looking cheap at a stock price of less than $15, Teladoc has not created any value for shareholders and is expected to see little growth over the next few years. For this reason, investors should stay away from this stock for now.