Why The Trade Recommendation On Teladoc Health?
The stock market had an
unprecedented year in 2020, putting up better-than-average gains while facing
down a global pandemic. The S&P 500 added more than 16% last year, but the
tech-heavy NASDAQ was the big winner, soaring nearly 44%. Some of the biggest
technological trends came clearly into focus last year, as streaming video,
cloud computing, and telemedicine gained legions of converts.
So far this year,
however, investors have been buying stocks that they believed would benefit
from the recovery, rotating out of many tech stocks in the process. This has
left plenty of bargains among these high-growth stocks in categories that
combine best-in-class products and services, huge tailwinds, and large
The future of medicine
came into focus last year with the accelerated adoption of virtual care,
telemedicine, and connected healthcare devices. The demand for app-based doctor
visits soared. That put industry-leading provider Teladoc Health in the pole position. Now that an end to the pandemic is in sight, some
investors believe the vast majority of patients will forego the ease and
convenience of digital appointments in favor of a return to in-person visits.
The evidence simply doesn't support that view.
Teladoc shares soared last year, gaining 139%.
Major Catalysts for This Trade.....
are embracing virtual care, and recent studies suggest that the majority will
continue to do so. A survey of 2,700 patients revealed that 90% found the quality
of care received during app-based video visits with their physician was as
good, if not better than regular office visits, according to research conducted
by Accenture. Some 60% of respondents said they planned to use telehealth
solutions with even greater frequency in the future to communicate with their
healthcare providers and manage chronic conditions.
considerably more convenient for patients and allows physicians to better keep
tabs on potentially high-risk patients. Virtual visits are also billed at a
lower rate than office visits, which makes telehealth an instant hit with
health insurance companies.
results paint a compelling picture. Revenue grew 98% in 2020, while total
patient visits surged 206%. While the bottom-line results were muddled by
acquisition-related costs and income tax complications, the company's adjusted
EBITDA increased 298%.
company says its revenue will increase at least 78% in 2021 to $1.95 billion
and its adjusted EBITDA will at least double to $255 million. That values
Teladoc shares at about 14 times expected 2021 sales -- not bad for a
high-growth name in the health tech space.
recent acquisition of Livongo Health puts Teladoc at the forefront of another booming
trend: the use of connected devices to manage chronic conditions. With more
than 147 million patients with at least one chronic condition, dealing with
them regularly can be time-consuming and expensive. By providing timely
reminders and hints via connected devices and apps, patients enjoy an improved
quality of life. The process also reduces the cost of healthcare, which
benefits insurers, creating a true win-win.
combined addressable market of Teladoc and Livongo tops out at more than $64
billion. When taken in the context of the $1.09 billion in revenue Teladoc
delivered in 2020, it illustrates the long runway for growth ahead.
Pullback Provides Opportunity.....
has lost close to 40% of its value in less than two months, primarily as a
result of the U.S. successfully administering over 167 million coronavirus
vaccines as of April 5. With nearly a quarter of the adult population fully
vaccinated, and Amazon announcing a nationwide expansion of its virtual-care
platform, there's been some concern about where Teladoc goes from here.
Wall Street says it will go up. With a consensus price target of almost $260,
Teladoc offers implied upside of 43% over the next year.
Sandler analyst wrote that he would be a buyer of the stock “on recent
care remains only in its early innings. Consulting firm McKinsey predicts that
the U.S. virtual-care market could reach $250 billion per year after the
pandemic is over. Teladoc's opportunities aren't just limited to the U.S.,
head start, commanding market presence (its customers currently include over
40% of the Fortune 500), and scope of products and services give the company
solid competitive advantages.
Teladoc Health is very
likely to keep the momentum going. With a revenue retention rate of
over 90%, a diverse array of virtual services, and an expanding subscriber
base, Teladoc's growth is extremely sustainable. Therefore, it should have no
problem meeting -- or even surpassing -- its revenue guidance for a 30% to 40%
increase per year through 2023.
This year Teladoc Health expects to increase its revenue and EBITDA to $2
billion and $265 million, respectively. What's more, the company has enormous
potential to scale its business outside the U.S. It currently operates in over
Teladoc Health is looking to become a one-stop platform for all virtual
the company added chronic disease treatment to its platform with its $18.5
billion acquisition of Livongo Health, which finalized in October. In Q3 2020,
it had 540,000 members enrolled in this segment. At the end of the fiscal year,
that number has already risen to 600,000.
Over 40% of Fortune
500 companies currently use Teladoc. Over 50 healthcare plans around the
country also cover its service. It should be no surprise that the company is
earning new interest from business' savviest players, as it invests up to 16%
of its sales each year into improving its platform.
Teladoc Health Stock Price Continue To Climb?
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