During the stay-at-home phase of the coronavirus lockdown, telemedicine thrived. When countries lifted the lockdowns and swore never to return to them, the growth prospects for Teladoc (NYSE:TDOC) stock immediately dimmed.

TDOC stock is trading nowhere near its 52-week high. It may never get there again. Cathie Wood, who manages ARK Innovation ETF (NYSEARCA:ARKK), has a substantial 4.73% allocation in the stock is bullish. Analysts think TDOC shares are worth around $52, according to Tipranks. Investors will need to dig deeper to envision this company’s fair value.

Resurgence Catalyst

Months after countries eased lockdowns, some places still report new contagious coronavirus variants. Covid-19’s highly contagious omicron subvariant is one data point that suggests a resurgence. Investors might flock to Teladoc stock to hedge against the risk of another lockdown.

The bad news for Teladoc investors is that the stock will rally on fears of temporary virus resurgences. The virus is most dangerous to at-risk populations, such as the elderly demographic.

Governments have antiviral pills from Merck (NYSE:MRK), Pfizer (NYSE:PFE) and AstraZeneca (NASDAQ:AZN) to treat people. They will not respond to the increasing spread by locking down cities. This would weaken the demand for telehealth medicine services.

People might want to have their annual physical in person. Doctors will give them a better, more accurate assessment of their health in this way. If this trend continues, the momentum for Teladoc’s virtual healthcare will slow considerably.

Headwinds from Weak Quarter

In the first quarter, Teladoc posted a whopping $41.58 a share net loss. It took a goodwill impairment charge of $6.6 billion. Fearful investors are unwilling to hold any technology or healthcare company that does not make money. The company’s negative earnings sent TDOC stock from $60 to as low as $27.38 after the report.

As business conditions worsen, investors will realize that the company does not have a business moat. Competition is rising, too. Health plans and health care providers may offer similar virtual care by using a video call supplier like Skype, Microsoft (NASDAQ:MSFT) Teams, or Zoom Video Communications (NASDAQ:ZM). Investors may protect their portfolio from lockdown risks by holding ZM stock instead.

Patients have a variety of alternatives to receiving their prescriptions digitally and securely. For example, health insurance companies around the world will encourage their clients to create an online account to deliver medical documents or prescriptions digitally. All involved parties may bypass Teladoc’s offering. They will avoid unnecessary fees, too.

Fair Value of TDOC Stock

Investors may build a multiples valuation (EV/EBITDA) model to estimate Teladoc’s fair value. Assigning a 20x EV to forward EBITDA multiple would imply a fair value of under $30.

Model from finbox

Teladoc’s 20x multiple is considerably higher than its competitors. Still, shareholders may assign a generous multiple by assuming the company will accelerate growth rates from here.

Cautious investors should wait for Teladoc to report second-quarter results. It will need to post earnings without any additional goodwill write-downs. Furthermore, the company needs to report a drop in expenses. This would indicate that Teladoc is growing subscriptions without overspending on maintaining its telemedicine platform.

Markets will not tolerate investing in companies that overspend on acquiring customers. Teladoc needs to grow up from here. It cannot rely on hype to attract investors.

On the date of publication, Chris Lau 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.