Without question, Teladoc Health (TDOC) served investors well during Wall Street’s rally out of last year’s post-coronavirus bear market. TDOC stock began 2020 just under 84 a share. It ended the extraordinary year in history at 199.96, up 138%.
So far this week, Teladoc shares are enjoying a brisk start, at one point up 7%. This year, however, the member of IBD’s medical software group has lagged.
Now that shares have slid as much as 58% from that peak, is TDOC stock a buy now?
This story will cover core fundamental and technical aspects. Trends in institutional ownership — the I in CAN SLIM — will also get a thorough scan.
After a gain of 21.6% from that entry, TDOC stock topped out at 308. During the stock’s slide in late February, it gave back all of that nice short-term gain. Such action meant it was time to sell the position and avoid an outright loss.
Please check out a daily chart and see how 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, reversals after making new highs indicate that buying demand is drying up and the sellers are now in charge.
This price-and-volume action also serves as a key defensive sell signal.
TDOC Stock Today
Started in 2002, Teladoc has established itself as 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. The Street expects sales to ratchet up another 84% this year to $2.01 billion, then rise another 29% in 2022.
An X-Ray Of Teladoc Fundamentals
However, the company continues to bleed red ink.
Analysts polled by Thomson Reuters see the company losing 51 cents a share in the second quarter of this year and 45 cents in Q3. Teladoc could lose $2.77 a share this year — more than $427 million, based on TDOC stock’s current share count — before cutting that net loss to 85 cents next year.
Operating cash flow, meanwhile, has not been stellar. In fact, Teladoc has only posted positive operating cash flow once — $25 million — since 2013.
Considering these numbers, the overall IBD ratings for now aren’t quite up to snuff.
According to IBD Stock Checkup, Teladoc stock gets a 4 Composite Rating 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. Occasionally, corporate turnarounds that make magnificent moves after a strong breakout will show a much lower score at the start of their big price ascent.
Also weighing on TDOC stock? A lowest possible 1 Earnings Per Share Rating on a scale of 1 to 99; a C grade for SMR Rating (Sales Profit Margins Return on equity) on a scale from A to E. Meanwhile, a 5 Relative Strength Rating means that over the past 12 months, TDOC has outperformed just 5% of all companies in the IBD database.
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.
Fund Ownership Picture
According to MarketSmith, the number of mutual funds owning a piece of Teladoc stock has climbed steadily. At of the end of the first quarter, as many as 1,434 funds held shares. That marks a sound increase from 1,166 funds as of the end of Q2 in 2020.
Virtus KAR Mid-Cap Growth (PHSKX), part of the IBD Mutual Fund Index, holds 1.6% of its assets in TDOC.
Management owns a 3% share of the 154.5 million shares outstanding. The float — or the amount of freely traded shares in a company — stands at 148.3 million. That’s a reasonable amount when comparing with health care giants Johnson & Johnson (JNJ) (2.63 billion shares outstanding), Merck (MRK) (2.53 billion shares) and UnitedHealth Group (UNH) (944 million).
Is TDOC Stock A Buy Now?
Notice how the stock has been trading below its 50-day moving average since mid-February. For leading growth stocks, that’s a no-no.
IBD charts plot the 50-day line 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.
It’s unclear if the May low of 129.74 has marked the ultimate bottom. If TDOC holds above this price, then it can begin work on actually forming a bullish chart pattern. For instance, if a pristine cup with handle emerges, the stock should be trading no more than 5% to 15% below its 52-week or all-time high. This pattern provides the launchpad for a healthy potential breakout.
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. Patience could pay off big time.
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