When it comes to issuing guidance for the next year, most companies wait until publishing Q4 results. Thus, it was unusual for Teladoc Health, Inc. (NYSE: TDOC) to issue guidance as early as Q3 2021.

Yet, turning the stock around by expressing exuberant optimism is a dangerous gambit. Two quarters later, chickens are coming home to roost.

See our latest analysis for Teladoc Health

Q1 Earnings results

EPS: -US$41.58 (driven by a non-cash goodwill impairment charge of US$6.6b)
Revenue: US$565.4m (miss by US$3.23m)
Revenue growth: +24.6% Y/Y

Other highlights

Adjusted EBITDA: revised to US$2.4-2.5b vs. consensus US$2.58b
FY CAGR: 23% (revised down from 31%)

If issuing guidance early was dangerous, upgrading the same as late as this February was disastrous. Revising a growth company for 800 basis points is nothing short of a catastrophe in a market that is already severely under pressure. So far, it seems that the company has underestimated the competitiveness of the niche and its marketing ROI.

Institutions Downgrade but Cathie Wood Doubles Down

In the wake of the latest news, institutions scrambled to issue rating and price targets downgrades.

Credit Suisse: to Neutral from Outperform, price target from US$114 to US$35
Citi: to Neutral from Buy, price target from US$115 to US$43
Wells Fargo: to Equal Weight from Overweight, price target from US$104 to US$40

These serious adjustments place the value in the 2017/2018 range, completely disregarding the entire run during the last 2 years. Yet, after a selloff, Cathie Wood picked up over 600k shares, adding to her positions in various ARK ETFs. Teladoc remains one of the biggest positions in Ms.Wood's portfolio as she stated that it is becoming a: "healthcare information backbone of the United States."

The Latest Ownership Numbers

With a market capitalization of US$5.4b, Teladoc Health is relatively large. We'd expect to see institutional investors on the register. Companies of this size are usually well known to retail investors, too. Looking at our data on the ownership groups (below), it seems that institutional investors have bought into the company. Let's take a closer look to see what the different types of shareholders can tell us about Teladoc Health.

ownership-breakdown — NYSE: TDOC Ownership Breakdown April 30th, 2022

What Does The Institutional Ownership Tell Us About Teladoc Health?

Institutional investors commonly compare their returns to a commonly followed index. So they generally do consider buying larger companies included in the relevant benchmark index.

We can see that Teladoc Health does have institutional investors, and they hold a good portion of the company's stock. This implies the analysts working for those institutions have looked at the stock, and they like it. But just like anyone else, they could be wrong. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of stock simultaneously.

earnings-and-revenue-growth — NYSE: TDOC Earnings and Revenue Growth April 30th, 2022

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Our data shows that ARK Investment Management LLC is the largest shareholder, with 12% of shares outstanding. In comparison, the second and third largest shareholders hold about 8.2% and 6.8% of the stock.

The shareholder registry shows that 50% of the ownership is controlled by the top 12 shareholders, meaning that no single shareholder has a majority interest in the ownership.

Insider and General Public Ownership Of Teladoc Health

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, too much power is concentrated within this group on some occasions. Our current data indicates that insiders own US$60m worth of shares (at current prices). While not an impressive number, it shows some alignment of interest between shareholders and the board. Still, it might be worth checking if those insiders have been selling.

With a 15% ownership, the general public, mostly comprised of individual investors, has some degree of sway over Teladoc Health. While this size of ownership may not be enough to sway a policy decision in their favor, they can still make a collective impact on company policies.

Conclusion

While institutional investors like Cathie Wood compare Teladoc's market opportunities with Amazon, we must remember that those were different times. Back in the late 1900s, the internet was still a novelty, and nowadays, it is a beaten path with many established players who will fight back tooth and nail to keep their moat intact.

Under those circumstances, it wouldn't be surprising to see some M&A activity in the niche, especially if some broad market sell-off drives the price down even more.

While it is well worth considering the different groups that own a company, other factors are even more important. Consider, for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with Teladoc Health, and understanding them should be part of your investment process.

If you would prefer to discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.

NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full-year annual report figures.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com

Simply Wall St analyst Stjepan Kalinic and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

Something went wrong