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Teladoc (TDOC) Up 73% Year to Date: Will the Rally Continue?

Sapna Bagaria

Teladoc Health, Inc. TDOC has been in favor with investors given clear visibility of business growth in a rapidly growing telehealth services industry.

Teladoc has impressed its investors with rise of 34% and 63% in revenues and visits, respectively, in the first nine months of 2019. This growth has been achieved on the back of its inorganic and organic endeavors.

The company’s strong performance has led the stock to surge 73% against its industry’s decline of 5.8%.

 

The company holds a first-mover advantage in the telehealth industry with no other player having the scale and size of business that it commands.
What looks furthermore impressive is the company’s ability to keep growing on the back of its recent deals and efforts on expansion in international markets, the aging U.S. population, which is likely to drive demand for telehealth services and its efforts to grow in Medicare advantage business.  

Factors to Drive Growth

Teladoc posted a positive EBITDA for the first time in 2018. In 2019, the progress on EBITDA was impressive.

The differentiating factor for Teladoc is its scale, breadth of clinical offerings and its programmatic efforts to drive utilization. It is the largest provider of telemedicine services globally.

Recent regulatory changes, which now allow telehealth benefits to be part of Medicare Advantage (MA) plans is a positive for Teladoc. This should open up new opportunities for the company. Effective 2020, telemedicine services will be eligible for reimbursement under MA. This is believed to increase the company’s market share as nearly 20 million of individuals, currently insured under MA, moves to telehealth services.

Teladoc is on track to deliver an integrated virtual care experience across platforms supporting acute complex and chronic care needs and addressing the mental health and physical health challenges in 2020. In this vein, the company made an investment in Vida Health. Teladoc Health will be the exclusive virtual care partner of Vida Health, collaborating to deliver chronic care solutions with increasing digital and clinical integration.

Teladoc has integrated with UnitedHealth Group, Inc., which has given the former company access to 15 million of its customers. This should accrue to Teladoc’s revenues in 2020 and beyond.

Recently, the company launched Teladoc Medical experts in the U.S. market onboarding more than 100,000 employees from UPS and Nationwide Insurance, leveraging insights and capabilities from its Advanced Medical and Best Doctors acquisitions into one single experience. The Teladoc medical expert service creates a virtual center of excellence for individuals grappling with the challenges of complex physical and mental conditions.

We believe Behavioral Health market presents a great opportunity for Teladoc given 168 million annual visits for the same, as reported by The Agency for Healthcare Research and Quality. Teladoc estimates 80% or 131 million could be treated via telehealth. This presents a huge revenue growth opportunity for the company.

Zacks Rank and Stocks to Consider

Teladoc carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the same space are Apollo Medical Holdings, Inc. AMEH, HealthEquity, Inc. HQY and LHC Group, Inc. LHCG.  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.

The Zacks Consensus Estimate of Apollo Medical, HealthEquity and LHC Group for 2019 earnings implies growth of 37.9%, 2.52% and 25.35%, respectively.

Today's Best Stocks from Zacks

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This outperformance has not just been a recent phenomenon. From 2000 – Q3 2019, while the S&P averaged +5.6% per year, our top strategies averaged up to +54.1% per year.

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