On Tuesday, BofA Securities adjusted its stance on Teladoc Health Inc. (NYSE:TDOC), reducing the stock's price target to $13.50 from the previous $16.50 while maintaining a Neutral rating.
The revision follows the observation of a 9% year-over-year and 2% month-over-month growth in Global BetterHelp Monthly Active Users (MAUs) in April, bringing the total to a record high. Despite this growth, Teladoc's revenue for the second quarter of 2024 is projected to fall slightly below the midpoint of its guidance.
For the second quarter of 2024, BetterHelp Therapy Services revenue is expected to experience flat to modest quarter-over-quarter growth, with run-rate MAUs trending 1% above the first quarter of 2024. In contrast, Teladoc's April MAUs increased by 84% year-over-year but showed a 2% month-over-month growth, which is a 13% moderation from the peak in January 2024. The core Teladoc app's run-rate MAUs for the second quarter are tracking 7% below the average of the first quarter.
BofA Securities highlighted the variability between MAU growth and Teladoc's reported metrics, indicating that strong growth trends in BetterHelp may not directly translate to Teladoc's overall performance. The firm is closely monitoring these trends early in the quarter and is looking for further progress in Teladoc's enterprise revenue growth, margin progression, and the development of BetterHelp's growth trajectory.
The lowered stock price objective to $13.50 is based on a 7.0 times the CY24E EBITDA, a reduction from the previous multiple of 8.5 times. This adjustment is attributed to a contraction in the multiples of Teladoc's peers. The firm has reiterated its Neutral rating on the stock, reflecting a cautious stance amid the observed market trends.
InvestingPro Insights
As Teladoc Health Inc. (NYSE:TDOC) navigates through a period of fluctuating user growth and revenue projections, InvestingPro provides a deeper financial perspective on the company's current position.
With a market capitalization of $2.11 billion, Teladoc's valuation implies a strong free cash flow yield, according to InvestingPro Tips. This could be a silver lining for investors seeking value in a company that analysts do not expect to be profitable this year. Moreover, despite trading near its 52-week low, Teladoc's liquid assets exceed its short-term obligations, which may provide some financial stability in the near term.
InvestingPro Data also reveals that Teladoc's revenue has grown by 6.01% over the last twelve months as of Q1 2024, with a gross profit margin of 70.81%. Still, the company's operating income margin stands at -8.57%, reflecting challenges in converting revenue to operational earnings. Investors should note that Teladoc's price has experienced a significant drop of nearly 39.74% over the past three months, potentially indicating a market reassessment of its value.
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