Without question, Teladoc Health (TDOC) served investors well during Wall Street’s rally out of the coronavirus bear market. TDOC stock began 2020 just under 84 a share. It ended the extraordinary year in history at 199.96, up 138%.
Lately, however, TDOC has lost even more momentum after failing to bottom out near 120. Shares have slid hard five weeks in a row, and are trying to bottom out. The stock fell below 100, a key psychological price level among institutional investors, for the first time since January 2020.
The reaction to Teladoc’s third-quarter results on Oct. 27 started out bullish. The next day, TDOC stock rallied 7.7% for its biggest single-session gain since Jan. 25, en route to an 8.6% gain for the week. Weekly volume soared to 21.4 million shares, more than doubling its average over the past 10 weeks.
Compared to the vicious sell-off from February to May, the recent slide from June to September was more gentle. And TDOC stock rebounded in solid fashion after making a new 52-week low of 120.67 on Oct. 4. The potential for a new base to form, possibly setting up a strong breakout, looked brighter — for a while.
Some folks on Wall Street recently touted the stock with abandon. In early November, Dow Jones Newswires reported Wells Fargo initiated coverage at outperform and a 156 price target. That price, for a while, had been within arm’s grasp. No longer.
So, is TDOC stock a buy now? Or is it time for shareholders to cut losses or lock in gains?
This story will cover core fundamental and technical aspects. Trends in institutional ownership — the I in CAN SLIM — also get a thorough scan.
Is TDOC Stock A Buy?
In late October, Teladoc posted a surprise third-quarter profit of 23 cents a share vs. an 8-cent loss a year earlier. Revenue shot up 81% to $521.7 million, a quarterly record. After-tax margin hit 7%.
Analysts polled by Thomson Reuters on consensus expected the firm to post a net loss of 67 cents a share in the third quarter and a 79% sales jump to $516.6 million. A year ago, Teladoc posted a net loss of 43 cents and sales of $288.8 million.
Jason Gorevic, Teladoc CEO, cited “expanding relationships” with leading national health plans thanks to a successful launch of its Primary360 offering. This product “reimagines the primary care model and delivers increased access and engagement to members,” Gorevic added.
U.S. access fees-related revenue made the bulk of the company’s sales at $413.6 million, up 113% year over year. International fees revenue climbed 19% to $38 million. Teladoc notched a 2% bump up in U.S. paid memberships to 52.5 million. The U.S.-based visit fee-only access metric rose 8% to 23.6 million.
Teladoc’s Past Chart Action
To better understand the current stock action, let’s first examine TDOC’s first rally attempt of 2021.
On Jan. 22, the large cap cleared a long base best described as a consolidation pattern. While the base featured elements of a double bottom, 253.10 served as a legitimate buy point.
After a healthy gain of 21.6% from that entry, TDOC stock topped out at 308. Then shares slid fast in late February, surrendering all of that nice short-term gain. Such action meant it was time to sell the position and avoid an outright loss.
The online health care innovator reversed off that 308 intraday high on Feb. 16 in above-average turnover. After a stock makes a big run, sharp reversals lower in heavy volume actually hint that buying demand is drying up. Plus, large fund managers are selling into strength. Such price-and-volume action serves as a key defensive sell signal.
TDOC Stock Today
Started in 2002, Teladoc is now a leader in virtual doctor visits. A network of more than 3,000 board-certified physicians help consumers get diagnoses and prescriptions across the U.S. and abroad. According to its latest 10-K annual filing to the Securities and Exchange Commission, more than 51 million unique paid members in the U.S. and 22 million “visit fee-only individuals” have access to the company’s expertise.
In the U.S., Teladoc showed a median response time of less than 10 minutes in 2020 for general medical inquiries.
Clearly, the Covid-19 crisis helped to accelerate adoption of online medical care.
Just witness the growth in the top line. From $123 million in 2016 to $1.09 billion in 2020, the Purchase, N.Y., firm has grown its sales a compound 72% each year over that four-year period. Amazing. And following third-quarter results, the Street now expects sales to ratchet up another 84% this year to $2.02 billion, then rise another 28% to $2.58 billion in 2022.
In the second quarter, the company launched myStrength Complete, a mental health service that combines app-based tools and coaching with a team of therapists and psychiatrists.
An X-Ray Of Teladoc Fundamentals
On another bright note, the company posted net operating cash flow of $111 million in the first nine months of 2021, up sharply from $61 million over the same time frame in 2020. That’s good. Cash, cash equivalents and short-term investments hit $826 million at the end of September. Teladoc also achieved $70 million in free cash flow, taking out capital expenditures and capitalized software development costs.
Despite nice improvement in many business metrics in the second quarter, the stock’s IBD ratings aren’t up to snuff, for now.
According to IBD Stock Checkup, Teladoc stock has hit an undesirable Composite Rating of 11 on a scale of 1 (awful) to 99 (awesome). The IBD Composite Rating melds key fundamental, technical and fund ownership metrics into a single easy-to-use score. In general, favor those stocks with a 90 Composite or higher.
Some corporate turnarounds, however, will make magnificent price moves after a strong breakout; they will show a low Composite score at the start of their big price ascent.
Teladoc’s 31 Earnings Per Share Rating on a scale of 1 to 99 is not ideal. A C grade for SMR Rating (Sales + Profit Margins + Return on equity) on a scale from A to E remains the same. Meanwhile, a Relative Strength Rating of 9 in recent days means that over the past 12 months, TDOC has outperformed just 9% of all companies in the IBD database. Tons of improvement needed here.
The best growth stocks tend to hold an RS Rating of 80 or higher before they go on amazing advances and hit scores of new price highs. In the realm of growth stocks, strength begets strength.
Fund Ownership Picture
According to recent data on MarketSmith, 1,337 mutual funds owned a piece of Teladoc stock as of the end of the third quarter. This marks a sound increase from 1,166 funds as of the end of Q2 in 2020. Mutual funds rated an A by IBD owning shares in TDOC include JPMorgan Mid Cap Growth, Thrivent Large Cap Growth, Gabelli Growth AAA, Sparrow Growth and Bailie Giffort US Equity Growth.
Management owns a 2% share of the 159.2 million shares outstanding. The float — or the amount of freely traded shares in a company — stands at 154.5 million. That’s a reasonable amount when comparing with health care giants Johnson & Johnson (JNJ) (2.61 billion shares outstanding), Merck (MRK) (2.51 billion shares) and UnitedHealth Group (UNH) (934 million).
Is TDOC Stock A Buy Now?
Lately, the stock has lost support at the 50-day moving average. It needs a new strong rebound to accelerate the base-building process.
IBD charts plot the 50-day moving average in red. Investors prefer to see the stock rise above this medium-term support-and-resistance level, then lead the 50-day line higher. This would mean that the stock’s overall trend is up, not down.
Unfortunately, TDOC is sinking sharply below the 50-day line and marking new 52-week lows. Once it bottoms out and rises multiple weeks in a row, the stock then can start work on a bullish chart pattern.
For instance, if a pristine cup with handle emerges, the stock should in most cases be trading no more than 5% to 15% below its 52-week or all-time high. This pattern sets up the launchpad for a potential big move — or in IBD’s parlance, a great breakout.
For now, the June 29 peak of 174.32 serves as the left-side high of a potential new base. At some point, the high of 156.82 during the week ended Nov. 5 may also come into play.
Keep an eye out for strong weekly gains in accelerating or unusually heavy turnover. That’s your telltale sign that the big boys and big girls on Wall Street are grabbing shares. IBD calls that the I in CAN SLIM: institutional accumulation, or institutional sponsorship.
A breakout to new highs would mean TDOC stock is following the path of least resistance — up in price. It also means there’s little to no overhead supply of desperate sellers willing to bury the stock with shares.
So for now, Teladoc stock is not a buy. But keep watching for signs of growing demand. The stock is still carving out the right side of a new base. Patience could pay off big time.
Original Post Can be Found Here