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Is Competition Intensifying for Teladoc's (TDOC) Business?

Zacks Equity Research
·3 min read

Telehealth industry leading company Teladoc Health, Inc. TDOC might have to share space with another player Amazon.com, Inc. AMZN, which is also planning to expand its telehealth offerings.

Amazon via its Amazon Care business is mulling over offering primary care for large employers through a mobile app that provides both in-person and online doctor visits, per Business Insider report, published last week. When Amazon Care was launched in February, it was meant solely for its employees, which allowed users to chat with providers, receive mail-order prescriptions and even access in-home care.  But the recent developments, which point to the entity’s lookout for telehealth service provision beyond its employees comes as a pressing concern for Teladoc.

Meanwhile, American Well Corporation AMWL, which was founded in 2006, declared an initial public offering, in September. This replicates that too many players are crowding the rapidly-evolving telehealth market, which is stiffening competition for incumbents like Teladoc.

As the company is yet to reach a break-even point in profitability, any kind of rivalry at the moment can affect its operations.

Another challenge is that the company currently has a relatively high level of leverage. The company’s total debt to total capital is 43% of equity as of Sep 30, 2020, which can be a bothering issue for the company should it face top-line woes from fierce competition when the bottom line is already in the red.

Therefore considering its fragile capital position and an early growth phase, Teladoc might confront hurdles from a strong company like Amazon. Moreover, the latter has a history of disrupting any industry that it sets its foot in.  

Amazon has a special liking for the healthcare space and has been dipping its toes into this space for a while now with the purchase of the mail order pharmacy company PillPack for $753 million. Also in 2018, the company along with Berkshire Hathaway Inc. BRK.B and J.P. Morgan ventured to provide health insurance, albeit no significant developments were achieved on this front.

However, Amazon can expedite the expansion of its telehealth services this time around, given that the service is much sought after among patients as uncertainty regarding the new COVID-19 mutant continues to worry all and sundry.

On a  positive note, Teladoc has been in a sweet spot so far this year, witnessing a spike in demand for its remote healthcare services amid the coronavirus aggravation. As an evidence, the company witnessed a 79% increase in revenues during the first nine months of 2020. Precisely, patient visits on the company’s network soared 164%.

The company successfully demonstrated a growth trajectory, both organically as well as through a solid inorganic story.  A number of acquisitions, such as InTouch Technologies, Inc., Livongo Health, Inc. and others expanded its business profile. Moreover, its international reach provides it with a competitive edge.

To conclude, even though Teladoc may face severe peer pressure, its first mover advantage, wide network and a diversified business portfolio should help it stay afloat.

Teladoc carries a Zacks Rank #3 (Hold), currently.  Year to date, the stock has gained 145% compared with its industry’s growth of 39%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

 

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Berkshire Hathaway Inc. (BRK.B) : Free Stock Analysis Report
 
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Teladoc Health, Inc. (TDOC) : Free Stock Analysis Report
 
American Well Corporation (AMWL) : Free Stock Analysis Report
 
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