Why Teladoc Health Stock Was Sliding Today


What happened

Shares of Teladoc Health (TDOC -4.96%) were moving lower Wednesday after the company announced a restructuring plan that included laying off roughly 6% of its non-clinician workforce, or about 300 people, and reducing its real estate footprint.  

The moves come as a number of other tech companies have announced layoffs and as Teladoc has struggled in the aftermath of its pandemic boom. Its shares are now trading below where they were when the health crisis began.

As of 2:38 p.m. ET, the stock was down by 5% for the session.

So what

In a letter to employees shared through a Securities and Exchange Commission filing, CEO Jason Gorevic said the layoff decision was difficult, but the company is cutting people whose roles are redundant. Teladoc has grown through acquisitions, and Gorevic said the changes it’s making now are intended to bring those formerly separate operations together. He also said the moves were in line with the company’s goals of delivering balanced growth in revenue and profitability.

Additionally, the company is streamlining its organizational structure, and further reviewing its real estate footprint and vendor relationships to ensure good returns on investment.

Together with earlier cost-savings measures, the company will take a charge of $4.4 million in the fourth quarter, and another $17 million in 2023.

Now what

These latest cost-cutting efforts come as Teladoc is struggling to prove it can be sustainably profitable. The company spent aggressively on acquisitions, but in many cases, it overspent, and even took a $6.6 billion write-down in 2022 on its takeover of Livongo Health.

Gorevic expressed confidence in the company’s ability to turn profitable, and with the right cost controls, it should be able to do so. However, disrupting healthcare with telehealth services may be more difficult than some investors anticipated. Teladoc still has an uphill battle ahead to prove itself as a business.

Jeremy Bowman has positions in Teladoc Health. The Motley Fool has positions in and recommends Teladoc Health. The Motley Fool has a disclosure policy.

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