Telemedicine has had a great year thanks to the pandemic, but with multiple companies releasing vaccines this year, is Teladoc still a good investment?
Dec. 5, 2020
Teladoc (NYSE: TDOC) is the biggest publicly traded telehealth company on the market, with a 75% market share, and it has seen incredible tailwinds from the pandemic. To avoid interpersonal contact and sitting in a waiting room, people opted instead to use their computers and mobile devices to see a doctor. This drove Teladoc’s stock price up nearly 128% and its revenue up over 85% year-to-date (YTD). Earlier this month, Pfizer and BioNTech announced successful trials with their vaccine, followed shortly by Moderna and then Oxford-AstraZeneca. As the world rushes with vaccine administration logistics and begins a return to normalcy, will telemedicine’s growth be stifled, and is Teladoc stock a buy?
The bull case for Teladoc
Teladoc has a first-mover advantage in telehealth and has been growing its offerings through mergers and acquisitions. In October of this year, the company completed a merger with Livongo Health, a company that offers monitoring and coaching services for chronic conditions like diabetes, obesity, and hypertension, further bolstering its spectrum of offerings. Teladoc can now cross-sell Livongo’s services to a market that includes 34.2 million Americans with diabetes, 88 million with pre-diabetes, 100 million with high blood pressure, and 99 million who are overweight. As a result of the merger, the company is projected to reach revenue of $1.3 billion for this year and revenue growth of 30% to 40% in the next three years.
With the pandemic accelerating telemedicine’s adoption by a decade, lawmakers have taken note of its necessity and have brought nearly 20 bills to the House and Senate since May to clear restrictions for Medicare and insurance providers in the telehealth realm. A telehealth visit is not only more time-efficient but also less costly than a traditional doctor’s appointment with a study showing a virtual visit could save patients up to $121. That’s a significant saving for people with chronic conditions who need more frequent doctor visits. The telehealth market is projected to reach over $190 billion in value by 2025 and with Teladoc’s significant market share, it is sure to realize a big portion of that sum.
The bear case for Teladoc
The biggest bear case for Teladoc is the fact that it isn’t yet profitable. It also reported a $0.43 loss per share in its last quarterly report and its stock trades at roughly 18 times 2021 revenue of $1.9 billion. Perhaps this was a bad time to pay $18.5 billion for Livongo, a company with revenue of only $338 million this year.
Aside from less-than-stellar financials, the company’s bread and butter will be senior citizens who aren’t particularly tech-savvy; and what about people without a computer or mobile device, not to mention those without broadband? There’s also the issue of pay parity for providers as health insurance companies might withdraw same-pay for telehealth visits as traditional office visits after the pandemic. This would certainly hurt Teladoc’s bottom line.
So, should I buy Teladoc Stock?
Absolutely. Teladoc, the market leader in its sector is a solid long-term investment. The pandemic forced providers and patients into a baptism by fire and practically laid the foundational infrastructure for the industry’s future. This company has a first-mover advantage in its sector and holds a formidable market share that practically assures its revenue will grow with the telehealth market. I would wait for the stock price to pull back a bit from investor vaccine sentiment and then jump in.
Quickfire Round:
1. Who is the CEO of Teladoc?
Jason Gorevic.
2. When did Teladoc go public?
July 1, 2015.
3. How many healthcare visits has Teladoc been used for?
2.8 million in Q3 2020, projected to reach 3 million in Q4 and 10.6 million for 2020 in total.
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