Wall Street says this beaten-down stock could rise 31%.

The fight for telemedicine experts continues Teladoc (TDOC 0.46%). The company’s stock price has been in freefall since 2021 (down 90% over the past three years), and 2024 began with another disappointing quarterly update that sent the stock further down. Is there still a reason to invest in Teladoc?

Wall Street analysts think so. Their average price target of $20.16 represents an upside of about 31% compared to the stock’s Friday closing price. Can Teladoc bounce back and achieve this goal in less than a year?

Sales growth slows significantly

Teladoc has had a lot to prove for some time. The early pandemic days when demand for the company’s services were at their peak are long gone. Telehealth has provided an affordable option for people who are separated from others but still need basic health care. Teladoc’s business hasn’t moved on since. Was the company just a pandemic stock?

Bears think this way. Teladoc’s fourth-quarter results, released on February 20, gave them more evidence to work with. Teladoc’s revenue for the period was $660 million, up 4% from the year-ago period. Teladoc’s top-line growth rate has fallen off a cliff over the past three years.

TDOC Revenue (Quarterly YoY Growth) data from YCharts

There were other worrying signs at Teladoc. Revenue from BetterHelp, a virtual therapy service that has been the most important growth driver for some time, remained flat at $276 million. Total visits decreased 8% year-over-year to 4.4 million, and average monthly revenue per member for the U.S. Integrated Care business decreased 1% year-over-year to $1.42. It’s no surprise that investors are increasingly taking their money elsewhere.

Has Teladoc had the last word?

Teladoc’s latest quarterly update was disappointing, but there were some positives. For example, the company continues to move closer to profitability. Net loss per share for the period was $0.17, compared to a net loss of $23.49 in the fourth quarter of 2022 (a period in which it reported a large non-cash impairment charge related to the acquisition). Teladoc’s margins also remain healthy. Adjusted gross margin was reported at 70.7% compared to 70.4% in the year-ago period.

Still, the market isn’t likely to push the stock price much higher if the company can’t start growing sales. Telehealth experts have a plan to help. First, Teladoc believes it has a large runway for growth within its existing customer base. Most of these people are not enrolled in chronic disease treatment services. Of those, only 16% use at least one chronic disease management product, up from 12% two years ago. Second, Teladoc is expanding into international markets and sees tremendous opportunities there as well.

Third, the company believes demand for therapy services is growing and increasingly shifting to virtual care. So there should be room for the BetterHelp service to grow. Could Teladoc’s plans help it regain favor with investors in the near term and match Wall Street’s price targets?

Considering the company’s stock is trading at around $15 per share and its forward price-to-sales ratio is less than 1 (which is well within the range of what could be considered an attractive valuation), Teladoc’s stock price could soar on very strong financial results. . Other very positive developments.

But the company’s own guidance inspires little confidence. The midpoint of Teladoc’s 2024 top-line guidance implies year-over-year revenue growth of about 3%, which is well below the 8% reported for 2023. I don’t expect Teladoc to see an immediate, significant rebound.

What are the company’s long-term prospects? I think the stock, while risky, still looks somewhat attractive.

Teladoc’s ecosystem of 90 million virtual care members provides a significant source of recurring revenue. The telemedicine market is expected to continue to expand globally based on convenience, and the company’s margins remain high. So if Teladoc can further strengthen its position and reduce its marketing and advertising costs, profitability will follow. Especially considering that it is already approaching profitability. But it will likely take some time for the company to change things.