With the pandemic causing social distancing and lockdowns, the telehealth industry is booming as it can create contactless diagnoses for patients with non-emergent symptoms. There are several companies in the industry and Teladoc, a pioneer in the telehealth industry is leading the way. With the stock plummeting since February, the stock offers a compelling price for investors that want to get in.
Teladoc (TDOC) is a telemedicine and virtual healthcare company founded in the United States back in 2002. Originally their business model is simply to allow patients to have consultations with a licensed doctor at any time and patients pay a monthly fee to access the service. But as technology evolved and Teladoc actively acquiring other companies, the company has become a full suite healthcare care platform for patients and companies.
The company now offers solutions for Wellness and prevention, Primary care, Mental health care, Acute care, Speciality care, Chronic care, Complex Care, and Care coordination. The foundation of Teladoc’s platform is based on primary care, primary care provides services from annual checkups and everyday health needs to managing chronic conditions and more complex challenges, it allows users of the platform to build an ongoing virtual care relationship with their primary care team and practicians. The service is really convenient as users can connect through the Teladoc’s app with their Primary Care team by phone, video, and in-app messaging with an appointment or on-demand. With the data the team collected, it is able to provide a more tailored and optimized caring program customized only for you. With Primary Care being intact, Teladoc is able to provide further services through the platform such as mental health care or chronic care. Chronic care is an area Teladoc is trying to expand into through its latest acquisition of Livongo. Livongo is the leader in virtual care for chronic diseases and it provides smart connected devices with smart coaching to provide support for patients with different chronic diseases. This acquisition further enhanced Teladoc’s platform completeness and provide an edge for its business that no other competitor is able to match with at the moment.
The global telehealth market size was valued at $61.4 billion in 2019 and is projected to reach $559.5 billion by 2027, which represents a CAGR of 25.2%. Also, 6 in 10 adults in the US have a chronic disease and 4 in10 adults have two or more chronic diseases. Teladoc’s business focuses right into these two industries that are growing rapidly and it provides massive tailwinds for the company. I believe telehealth will dramatically change the healthcare system as it provides a lot of advantages. It is specifically important in developing countries and rural areas where there are only very few clinics and hospitals with most of them being very far away. Telehealth helps overcome the distance barrier and allows these people to get the basic healthcare that they deserve. A lot of people are still used to the traditional medical setting and are reluctant to try virtual healthcare but I believe the adoption rate will increase with the push from the pandemic and the overall awareness and advertisement for telehealth.
Competition is increasing as companies such as American Well (AMWL) and even Amazon (AMZN) are trying to gain market share in this transformational industry. However Teladoc has the first-mover advantage and already has 51.5 million subscriptions for its platform and the number is still growing every quarter, also Teladoc’s capabilities with its full suite of solutions and especially in the chronic disease space further separate it from its competitor. As of the time of writing, the company’s third-quarter revenue grows 81% year-over-year to $522 million, with total visits increasing 37% to 3.9 million and the US Paid Membership increased 2%. Although it is expected that revenue growth will slow down as the pandemic starts to ease, the forecast revenue growth from 2022–2025 is still at around 25%. I personally believe the growth rate will be higher as analysts are underestimating the adaption rate of virtual care especially in countries outside of the US which represents a huge growth opportunity for Teladoc. Also, I think we will see Livongo bringing in surprisingly high revenue as Teladoc’s and Livongo’s customer base only have a lapse of 20% which allows a lot of cross-selling opportunities. The current fwd 22 price to sales ratio is only at 6.56 which is very undervalued compared to other high-growth tech stocks. The company is not yet profitable but it is understandable as it is still investing heavily in its technology and platform to further widen its moat. I believe Teladoc is a giant in the making and the best days are still ahead of us.
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