Back in 2020, Teladoc Health (TDOC -0.37%) was a market darling. The company's business was well adapted to survive -- and even thrive -- amid the worst of the pandemic. Its stock price soared as a result. What a difference a few years can make. Due to various issues, Teladoc's shares have been in free fall since 2021. However, the company hasn't given up. The telemedicine specialist is actively trying to turn the tide. Could 2025 be the year Teladoc finally pulls that off? Let's find out.
The new CEO is hard at work
Teladoc underwent an important change last year. In June, it appointed a new CEO, Charles Divita. Clearly, things were no longer working under the former head of the company. Divita will have the difficult task of righting the ship, something that isn't easy to do in a mere year and a half. However, several things could help the company in 2025. Let's consider three.
First, Teladoc could improve its existing product offering. The company serves customers through its integrated care unit, its BetterHelp therapy segment, and a chronic care unit.
How can it improve these? One crucial initiative it is pursuing with BetterHelp, which was once its key growth driver, is insurance coverage. If Teladoc can get third-party coverage for patients, that will almost certainly help grow the service's ecosystem, which already has well over a million members. Teladoc will pursue initiatives to improve its other services as well.
Second, the company is making a push internationally. While most of Teladoc's revenue still comes from the U.S., its top line abroad has been growing faster. In the third quarter, Teladoc's total revenue came in at $640.5 million, down 3% compared to the year-ago period. The company's international revenue grew by 15% year over year to $104.3 million. If Teladoc's international revenue becomes a larger part of its top line -- and growth in that department remains strong -- it will help the company turn things around.
Third, Teladoc is working on becoming more efficient, cutting costs, and improving its margins. That is another goal for the company this year. One reason Teladoc continues to lag the market is that it is not yet consistently profitable despite having pretty high gross margins, generally around 70%.
TDOC Gross Profit Margin (Quarterly) data by YCharts
The company's customer acquisition costs remain high. But if it can find ways to cut down some expenses and get meaningfully closer to showing green on the bottom line, investors should reward the stock.
Is Teladoc worth the risk?
If Teladoc's initiatives pan out, we can expect decent revenue growth in 2025, a stronger presence in international markets, a rejuvenated BetterHelp segment, juicier margins, and progress on the bottom line. That's a big "if," though, and at this point, it's hard to say whether the company will succeed in all, or even most, of its efforts. Meanwhile, certain things will pose challenges to the company, including competition in the telemedicine market. That's one reason why Teladoc's BetterHelp segment stopped performing as well as it used to.
Elsewhere, though it is trying to be more disciplined when expanding internationally, these initiatives could still come with added expenses and costs that will keep the bottom line in the red. Of course, even if Teladoc doesn't meet all its 2025 goals, it could eventually do so. Here's the bottom line. There is substantial upside for the company, considering its current share price, its position in telemedicine, and the fact that the industry is now well established and should continue expanding for a while. However, there is also plenty of risk involved here, so only investors comfortable with heightened volatility should even think about initiating a position.
