Analysts head for the exits on Teladoc as stock plunges more than 40%

Published Thu, Apr 28 202210:22 AM EDTUpdated Thu, Apr 28 20224:41 PM EDT

Wall Street analysts issued a string of downgrades on Teladoc following the stock's plunge post earnings. A weaker-than-expected revenue guidance from Teladoc's most recent quarterly report — along with a $6.6 billion impairment charge — spurred investors to dump shares of the telemedicine company. The company expects "noise" from competitors to persist, dampening growth of its fastest-growing businesses in mental health and chronic care. Shares of Teladoc closed down about 40.2% Thursday. "Despite the change in our 2022 outlook, we remain confident in our position as the leader in the digital health space," Teladoc CEO Jason Gorevic said in the most recent earnings call. However, several analysts on Wall Street were less confident. At least six analysts downgraded the company following the earnings report and issued a string of price target cuts — with one analyst slashing his target by 69.3%. Here's a rundown. Guggenheim downgrades to neutral The surprise revenue guidance reduction lowered confidence in Teladoc, according to Guggenheim. Analyst Sandy Draper downgraded Teladoc to neutral from buy on Thursday, saying in a note the firm's prior buy rating on Teladoc was based on forecasts of 25% to 30% revenue growth through 2024, along with a more than 100 basis point annual margin expansion over that time. "We no longer think TDOC can deliver on our initial top and bottom line projections," Draper wrote. "Given the multitude of moving parts and uncertainty around the longer term revenue growth rate and EBITDA margin, we prefer to be on the sideline until we see better execution of the longer term strategy." Guggenheim removed its Teladoc price target of $96 per share. Credit Suisse downgrades to neutral The investment firm downgraded Teladoc to neutral from outperform, saying Thursday that analysts are less confident in Teladoc's ability to sustain growth as it faces challenges in its mental health and chronic condition businesses. "Despite the revision to the 2022 outlook, TDOC remains confident in its strategy," wrote analyst A.J. Rice. "However, we prefer to move to the sidelines after the latest results and market uncertainty with a downgrade to Neutral." Credit Suisse its Teladoc price target to $35 from $114. Wells Fargo downgrades to equal weight Teladoc will have to establish how it will differentiate its business after its "soft" first-quarter earnings, according to Wells Fargo. Analysts downgraded Teladoc to equal weight from overweight on the back of the company's earnings results that introduced "significant uncertainty" to the revenue outlook. "To date TDOC has generally benefited from first-mover advantage in its verticals, but greater scale and a broader product set do not appear to have established a large enough competitive moat given relatively low barriers to entry," wrote analysts Stephen Baxter and Stan Berenshteyn. "Until competitive concerns recede or the company is more clearly able to establish areas of sustainable differentiation, we think it is difficult to build a case for material outperformance," they said. Wells Fargo cut its price target on Teladoc to $40 per share from $104. Citi downgrades to neutral Teladoc's first-quarter results revealed "cracks" in the health company, according to Citi. Analysts downgraded Teladoc to neutral/high risk from buy/high risk, saying in a Thursday note that competitors are weighing on Teladoc's mental health and chronic care businesses. "While we are reticent to make sweeping changes to our thesis based off of one poor quarter, we are doubtful that we will see the competition-driven headwinds abate anytime soon," wrote Daniel Grosslight. "This will keep TDOC's share price in a tight band over the next twelve months." Citi cut its price target on the stock to $43 from $115. William Blair moves to market perform Analysts downgraded Teladoc rating to market perform from outperform, saying the stock is "hard to recommend" given its current challenges, and the company's downward revision to guidance. "We believe it is quite hard to assess how quickly the emerging headwinds in both behavioral and chronic care management will subside; we therefore find it hard to recommend the stock at present—again, given the low visibility we have on the two key issues facing the company," analyst Ryan Daniels wrote. JPMorgan downgrades to neutral The telemedicine company has turned into a "show-me" story, according to JPMorgan. Analysts downgraded Teladoc to neutral from overweight, following "highly disappointing" guidance in its most recent earnings call compared to its prior report. "While we continue to believe in the longer-term opportunity around increased utilization of virtual care services and the strength of the company's comprehensive platform, with a breadth and depth of capabilities well ahead of peers, we expect the stock to be a show-me story in the near term," Lisa C. Gill wrote. "The company will need to prove it can deliver on the revised expectations and as we await any incremental color on the impact to the longer term outlook," Gill said. JPMorgan also cut its price target by more than half to $53 per share from $125. —CNBC's Michael Bloom contributed to this report.

Jason Gorevic, CEO, Teladoc

Scott Mlyn | CNBC

Wall Street analysts issued a string of downgrades on Teladoc following the stock's plunge post earnings.