As a pandemic-era star fallen from grace in recent times, Teladoc Health(NYSE: TDOC) nevertheless remains prominent in the telehealth space -- in fact, for many, it's a bellwether for the segment. Its stock also staged something of a rally at the end of October, buoyed by better-than-expected third-quarter results.
As always, investors focused on the company's revenue and bottom-line performance. While both of those line items are important, another factor is a more compelling watch with Teladoc.
Getting the message out
Teladoc's major weakness these days is BetterHelp, the smaller (and worse-performing) of its two business segments, which concentrates on mental health services.
This unit brought in just under $257 million of the company's overall $640.5 million revenue in Q3. Uncomfortably, its take was down by 10% year over year. This was in marked contrast to segment No. 1, the general integrated care business, which posted 2% growth and brought in nearly $384 million.
The tele-mental health realm has been filled with determined competition lately. As a large and still well-capitalized company, Teladoc is attempting to maintain or grow share with significant marketing efforts.
Its advertising and marketing (A&M) costs have ramped up notably with the pandemic, ditto for their share of total revenue. In COVID-heavy 2021, Teladoc's yearly spend on A&M was nearly $417 million, representing 21% of total revenue. A mere two years later, the tally jumped in both absolute and percentage-of-revenue terms. 2023's almost $689 million swallowed 26% of revenue.
This wasn't a fluke or a one-off. In all three quarters of 2024 reported so far, that percentage was even higher, at either 27% or 28%.
The company has something to prove
Advertising/marketing pushes are a business technique as old as time. Effective campaigns can rope in new, hopefully steady, customers when done effectively. Yet Teladoc's doesn't seem to be helping much, at least not yet.
Investors willing to give Teledoc the benefit of the doubt should highlight that advertising and marketing line in quarterly and annual reports for an indication of whether its efforts are paying off.
Should you invest $1,000 in Teladoc Health right now?
Before you buy stock in Teladoc Health, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Teladoc Health wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $833,729!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. TheStock Advisorservice has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of November 4, 2024
Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Teladoc Health. The Motley Fool has a disclosure policy.
