Teladoc Health Can Move Higher if Short Sellers Get Out of the Way

Stock Market

Teladoc Health (NASDAQ:TDOC) is trading at levels not seen since before the Covid-19 pandemic. This is despite the fact that the company’s revenue grew 45% year-over-year to $554 million in 2021. Telehealth is clearly catching on, but TDOC stock flew too high, too fast and continues to draw considerable short interest. Something has to give.

I can’t say bulls and bears didn’t have a case to make. Teladoc stock jumped 139% in 2020 and still had another 46% to go before it began to roll over in February 2021. Bulls can point to earnings per share that grew by 32% last year.

But the company is still unprofitable, and that’s not expected to change until the end of 2023 at the earliest. As a growth stock, that shouldn’t prevent investors from buying TDOC stock, but it’s fair to say there was profit to be taken.  

Those days seem to be over. But TDOC stock still has over 15% short interest as of this writing. In fact, it’s one of the market’s most-shorted stocks.

This is where the bullish and bearish cases collide. Teladoc bulls are justifiably excited about the emerging partnership between Teladoc and Amazon (NASDAQ:AMZN). While this is starting out as just audio visits, it won’t be long before video conferencing will be available. 

The company has drawn the attention of Cathie Wood, who has added shares of TDOC stock to her ARK Genomic Revolution ETF (BATS:ARKG). But Woods’s exchange-traded funds (ETFs) have struggled in this market selloff, and some investors have adopted a strategy of shorting whatever Wood is buying. If that’s the case, TDOC stock may stay range bound until either the bulls or bears can gain the upper hand.  

Teladoc is the definition of a speculative investment. The telehealth pioneer’s stock shot higher as the pandemic provided the best proof-of-concept the company could have asked for. And now that Americans have become used to this, it’s not going away.

As InvestorPlace contributor Tezcan Gecgil recently pointed out, “Most Americans have started visiting doctors in person again, yet the platform is still growing. For instance, it had 4.4 million visits in Q4 and 15.4 million in full-year 2021, up 41% and 38%, respectively.” 

Buying TDOC stock seems like a no-brainer at its current price. Rising adoption prior to the Amazon partnership will only go up. That can take Teladoc from being a niche player to something more — especially since it collects valuable data that health insurance providers need. Analysts rate Teladoc as a strong buy heading into earnings in late April.  

On the date of publication, Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines. 

Chris Markoch is a freelance financial copywriter who has been covering the market for over five years. He has been writing for InvestorPlace since 2019.

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