Teladoc Tumbled 38% After Big First-Quarter Loss. Is It Just a Pandemic Play?

The loss in the first quarter was mainly driven by a noncash goodwill impairment charge of $6.6 billion, which is often recorded on the income statement after a company acknowledges that an asset has lost value or become completely worthless. 

In Wednesday’s news release, Teladoc didn’t disclose much details about the goodwill impairment charge, but a large part of goodwill on Teladoc’s books came from its $18.5 billion acquisition of Livongo in 2020, according to the company’s filings with the Securities and Exchange Commission. Livongo is a digital health management and coaching platform for people with chronic conditions like diabetes.

The goodwill impairment was triggered by the sustained decline in Teladoc share prices, which is driven by the increased discount rate of the company’s future cash flows and decreasing valuations for peers in the high-growth digital healthcare space, said Chief Financial Officer Mala Murthy during a conference call Wednesday afternoon.

American Well

  (AMWL) and

1life Healthcare

(ONEM), two of Teladoc’s major competitors in the telemedicine space, have seen their shares lose 80% and 83%, respectively, over the past 12 months.

Teladoc revenue increased 25% from the year-ago quarter to reach $565.4 million. The firm demonstrated “significant progress” in a number of strategic initiatives, said Teladoc CEO Jason Gorevic in a statement. Still, the number came in slightly lower than the $568.7 million estimates from Wall Street analysts.

For the fiscal year, Teladoc now expects to see revenue between $2.4 billion and $2.5 billion, and earnings before interest, taxes, depreciation and amortization, or Ebitda, ranging from a negative $7 million to a negative $52 million. The company has previously projected $2.55 billion to $2.65 billion in revenue and $18 million to $48 million in Ebitda.

“We are revising our 2022 outlook to reflect dynamics we are currently experiencing in the direct-to-consumer mental health and chronic condition markets,” says Gorevic, noting that higher advertising costs in some channels have dragged on the yield of its marketing spending. The firm is also seeing an “elongated sales cycle” in the chronic-condition market, says Gorevic, as employers and health plans evaluate their long-term strategies.

Following the disappointing earnings report, Teladoc shares, which had already fallen 3.1% during Wednesday’s trading to $55.99, slid further after hours to reach $34.50. If the losses are retained at Thursday’s market open, it will be the lowest level for the stock since March 2018 and cause significant losses for some of its largest shareholders. 

Cathie Wood’s $12 billion

ARK Innovation ETF

(ARKK), for example, has been a big buyer of Teladoc shares since they fell from the 2021 peak. As of Wednesday’s close, Teladoc was the fund’s third largest position——with a nearly 7% weight worth more than $652 million——only behind

Tesla

(TSLA) and

Zoom Video Communications

(ZM). That means the 38% plunge in Teladoc stock would drag the ARK fund lower by nearly 3%.

Write to Evie Liu at evie.liu@barrons.com