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%.
And Teladoc shares are enjoying a brisk rebound lately, finding bullish support at the 21-day exponential moving average. On another bullish note, TDOC stock has climbed back above its 50-day moving average for the first time since February.
This year, the member of IBD’s medical software group has lagged. Headed into Tuesday’s trading, Teladoc’s medical software group ranked a lowly No. 153 out of 197 industry groups for six-month relative price-weighted performance.
Now that shares, despite a nice rebound lately, still trade 44% from a 308 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% to $2.59 billion 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 53 cents a share in the second quarter of this year and 47 cents in Q3. Teladoc could lose $2.80 a share this year — more than $427 million, based on TDOC stock’s current share count — before cutting that net loss to 94 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 slowly improving 14 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 9 Relative Strength Rating means that over the past 12 months, TDOC has outperformed just 9% 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. In other words, in the realm of growth stocks, strength begets strength.
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 1,437 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 2% share of the 154.5 million shares outstanding. The float — or the amount of freely traded shares in a company — stands at 149.9 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?
While the stock is now trading above its 50-day moving average and the 10-week line on the weekly chart, more gains at this point would help kick-start the base-building process. IBD charts plot the 50-day and 10-week lines 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 low, then it can begin work on actually forming a bullish chart pattern. For instance, if a pristine cup with handle emerges, at that point 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 potential big move — or in IBD’s parlance, a great 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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