Telemedicine specialist Teladoc Health(NYSE: TDOC) has been a terrible investment over the past three years. Once the company's pandemic-fueled business boom cooled down, its revenue and visit growth slowed down considerably while it remained unprofitable.
However, Teladoc is trying to turn things around. Recent developments, including a leadership change and the planned acquisition of Catapult Health -- a virtual health provider focusing on preventive care -- are among the moves that it hopes will help it back on the right track. Is that enough to make Teladoc's shares attractive again?
Doubling down on chronic care
Teladoc's acquisition of Catapult Health -- expected to be completed by the end of March -- fits the company's vision of providing customers with a deep portfolio of services. Catapult helps its members with at-home health exams that can uncover conditions they were not aware they had, including prediabetes, which a surprising 33% of the adult population in the U.S. is estimated to have -- though many don't know they do. Catapult follows these exams with virtual visits with a health professional to help develop personalized action plans.
The acquisition will cost Teladoc $65 million, with up to $5 million in additional payments provided certain milestones are met. Note that in 2020, Teladoc dished out $18.5 billion to buy chronic care specialist Livongo Health. This new acquisition expands Teladoc's reach in at-home preventive care and chronic health management. But how exactly can it affect the company's financial results?
It's not a game changer
Catapult Health's revenue was $30 million over the 12 months ended in September 2024. That's a drop in the bucket for a company like Teladoc, which recorded $2.6 billion in revenue in 2024.
However, under Teladoc's umbrella, Catapult will be plugged into a chronic care network of 1.2 million members, which will help increase Catapult's "covered lives" count of over 3 million patients.
Teladoc likely hopes to cross-sell Catapult's services to its 93.8 million integrated care members. Further, Catapult's at-home checkups help deliver significant cost savings of more than $1,400 over three years, according to an independent analysis shared by the company. That's why there could be rising demand for these kinds of services among Teladoc's major institutional clients.
And that's all well and good, but all of that is theoretical at this point. How much does this acquisition move the needle for Teladoc?
My view is that it barely does, at least for now. Here are three reasons why.
First, Teladoc is already having trouble cross-selling its existing chronic care services to its vast network of patients. The company has 93.8 million integrated care members but barely more than a million chronic care patients. How much will the addition of Catapult Health change that?
Second, Teladoc's core business, including its BetterHelp virtual therapy unit, which was once its most significant growth driver, continues to struggle. In 2024, Teladoc's revenue of $2.6 billion declined by 1% year over year.
The company's adjusted earnings before interests, taxes, depreciation, and amortization (EBITDA) declined by 5% year over year to $310 million. Teladoc ended the year with about 405,000 BetterHelp paying users, down 11% compared to the previous fiscal year. Teladoc faced significant competition for virtual therapy services, leading to worse results than expected. That's an ongoing problem the company will have to deal with, and it is one it needs to solve if it hopes to be successful in the long run.
Third, Teladoc remains unprofitable. It has sometimes recorded bottom-line numbers deep in the red over the past three years, partly due to noncash impairment charges related to the acquisition of Livongo Health. Last year, Teladoc's net loss per share was $5.87, much worse than the $1.34 reported in 2023.
Catapult Health is not publicly traded, so we don't know whether it is profitable. However, if it were, there is a good chance Teladoc would have said so in the press release announcing its acquisition, just like it shared Catapult's trailing-12-month revenue.
Teladoc's long-term plan for Catapult could work and lead to increased revenue and earnings. But for now, things haven't changed much. Though it remains a leader in the telemedicine industry, a market ripe for growth, its recent performances leave a lot to be desired, making it a somewhat risky stock. Those who can handle significant volatility might want to consider initiating a small position in the company. Investors who can't should look elsewhere.
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Prosper Junior Bakiny has positions in Teladoc Health. The Motley Fool has positions in and recommends Teladoc Health. The Motley Fool has a disclosure policy.
