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Teladoc (TDOC) Up 22% in a Year: Will the Rally Continue?

Zacks Equity Research

Teladoc Health, Inc. TDOC shares have been in favor with investors by virtue of its consistent top-line growth, increasing subscriptions and visits.

This has led the stock to gain 23% in a year’s time compared with its industry’s rise of 4%.  

Teladoc is one of the few listed companies with a leading market share in the burgeoning telehealth market. The company has been continuously navigating in the domestic as well as overseas telehealth market through mergers and acquisitions.

Teladoc is fast gaining ground in the rapidly growing telehealth services industry in the United States, with ample scope for flourishing, owing to rising health care costs following inefficient care, duplication of services, significant waste and extreme variation in access, cost and quality of care.

Moreover, Teladoc has the capability to address this inefficiency by providing superior quality of care through platform that caters to consumer demand and physician availability in real-time and in various modalities such as video, web, mobile and telephone. The emergence of technology, via big data and analytics, cloud-based solutions, online video and mobile applications, also offers the company with huge opportunity for growth.

Teladoc’s strategy to complement its organic growth with inorganic means is commendable. The acquisitions of HealthiestYou, Best Doctors, Advance Medical have increased the breadth of its business. The latest acquisition of Advance Medical has given it a global exposure, which should enable it to harness the international markets.

A report by Medgadget says that Global Telehealth Market is expected to grow at a healthy CAGR of 29.8% by 2023. Teladoc is one of the few companies that should gain from the global demand for telehealth, given its acquisition of Advance Medical, which has expanded the company’s business in Latin America and Asia. Advance Medical allows Teladoc to deliver care in 125 countries in more than 120 languages.

The company has also formed a virtual care service called Teladoc Global Care, with infrastructural support from the recent acquisitions of Advance Medical and Best Doctors. This new platform has enabled to offer its services globally, which was until now restricted within the United States.

We expect the company’s Global Care platform to attract huge traction as employers and insurers demand international services for telehealth, due to growing number of expatriates.

We thus expect the company’s revenues to be aided by increased business from international operations, while its U.S. business is already doing well. The company’s strong growth is expected to keep the rally in the shares alive.

Teladoc, carrying a Zacks Rank #3 (Hold), has gained 39% year to date, compared with the industry’s growth of 9%.

Some better-ranked stocks in the same space are HealthEquity, Inc. HQY, ICON PLC ICLR and Premier, Inc. PINC. Each of these stocks carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

HealthEquity and Premier beat estimates in each of the four quarters with an average positive surprise of 19.2% and 4.3%, respectively. ICON surpassed estimates in three of the four reported quarters with an average positive surprise of 1.3%.

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