Don't Sweat the Teladoc Stock Pullback

An unwinding of pessimism could provide even more tailwinds

The last time we checked in with Teladoc Health (NYSE:TDOC), the telehealth provider was facing off with a key trendline. However, TDOC took a deeper dive than anticipated, shedding 4% in the last 30 days. Now, this extended pullback has brought the stock to another area that, if past is precedent, could halt the skid in its tracks.

More specifically, TDOC has pulled back to within one standard deviation of its 80-day moving average, following an extended period above the trendline, defined for this study as having traded north of the moving average 60% of the time in the past two months and in eight of the last 10 trading days. According to Schaeffer's Senior Quantitative Analyst Rocky White, five similar signals have occurred within the past three years, after which the equity enjoyed an average 21-day gain of 10.9%, with four out of five of these returns positive.

At last check, Teladoc Health stock was trading at $169.94, up 1.6% for the day. A move higher and of similar magnitude would put the equity just below the $190 level, reclaiming that formerly supportive 40-day trendline. Though falling further from their April 27 record highs of $203.95, TDOC shares have still doubled in value year-to-date.

Despite the sizable 2020 advance, the majority of analysts remain on the sidelines. Of the 21 brokerages in coverage, 11 rate it a tepid "hold," while the 12-month consensus price target of $174 is a conservative 3.4% premium to its current perch. In other words, a round of overdue upgrades and/or price-target hikes could fuel additional gains.

Meanwhile, short sellers continue to hit the exits. Short interest fell by nearly 15% during the two most recent reporting periods to 8.56 million shares. Still, this represents a healthy 12% of TDOC's total available float, so a continued exodus could provide even more tailwinds.