TDOC - Teladoc Health: Cheap Valuation Is Fair Due To Fundamental Flaws

2024-06-05 09:26:14 ET

Summary

• Teladoc Health is undervalued due to fundamental flaws like decelerating revenue growth and intense competition in the telehealth market.
• The company has not achieved operating profitability and faces challenges with its business model and high expenses.
• Despite its cheap valuation, TDOC's strategic weaknesses are reflected in its stock price.

My thesis

Despite extreme undervaluation based on valuation ratios and the DCF model, I am neutral about Teladoc Health ( TDOC ) and assign it a Hold rating. Deep undervaluation is justified by multiple fundamental flaws like revenue growth decelerating closer to zero before the company achieved profitability, razor-thin free cash flow margin, and extremely intense competition as hundreds of companies joined the U.S. telehealth market in 2023. There is a chance for a turnaround after the CEO left in early April, but I would not bet on it before I see revisions to the business model, which is likely not economically sound. Therefore, I do not recommend buying a 96% dip from 2021 highs....

For further details see: