By Amruta Khandekar
(Reuters) – Teladoc Health’s mental health services unit will grab focus when the largest U.S. telehealth company reports first-quarter earnings on Wednesday, with investors worried that growth will be eclipsed by rising costs in a competitive market.
The mental healthcare sector has grown in prominence over the past two years as the COVID-19 crisis boosted demand for such services and prompted more firms to offer virtual therapy.
“TDOC is having to spend more in advertising and marketing to achieve user growth, and we see profitability metrics becoming increasingly important for investors,” said Stephens analyst Scott Schoenhaus.
Teladoc said in February it expected greater advertising spend through the year as it targets strong growth for its BetterHelp mental health business, which brought in revenue of more than $700 million in 2021.
“Certainly the ad spend is getting more competitive, but it shouldn’t be worrisome unless you see kind of a drastic drop in the use of the solution,” Berenberg analyst Dev Weerasuriya said.
THE CONTEXT
** Teladoc, which counts Cathie Wood’s Ark Invest as its biggest shareholder, has posted strong growth during the pandemic as demand for its services surged with patients seeking alternatives to in-person hospital visits.
Click here for an interactive graphic: https://tmsnrt.rs/3EMaHiM
** Teladoc acquired BetterHelp, a provider of online therapy services to customers, in 2015. The unit has grown over the years, with its revenue more than doubling in 2021.
Click here for an interactive graphic: https://tmsnrt.rs/3ODAn5B
THE FUNDAMENTALS
** Teladoc is expected to report first-quarter revenue of $568.8 million, a rise of 25% from a year earlier, according to the mean estimate of 24 analysts based on Refinitiv data
** The company reported revenue of $554.2 million in the fourth quarter
WALL STREET SENTIMENT
** The current average analyst rating on Teladoc shares is “buy”, with seven analysts rating it “strong buy”, 11 “buy” and 12 “hold”
** Wall Street’s median 12-month price target is $96, about 59% higher than the company’s Monday close
** Teladoc shares have lost 34% of their value so far this year, after falling 54% in 2021
QUARTER ENDED EPS ESTIMATE ACTUAL EPS BEAT, MET,
($) ($) MISSED
DEC. 31 2021 -0.56 -0.07 BEAT
SEPT. 30 2021 -0.65 -0.53 BEAT
JUNE 30. 2021 -0.56 -0.86 MISSED
MARCH. 31 2021 -0.62 -1.31 MISSED
DEC. 31 2020 -0.24 -3.07 MISSED
SEPT. 30 2020 -0.32 -0.43 MISSED
(Reporting by Amruta Khandekar in Bengaluru; Editing by Aditya Soni)
