Teladoc is a leading telemedicine company providing software tools for patients and doctors.
TeladocSeptember 27, 2020
Thesis - Teladoc is the global leader in virtual healthcare. Their primary product connects patients and doctors over video conferencing, however their ambition is to own all of digital healthcare. Since I first mentioned Teladoc in edition 2, Teladoc have merged with another hot healthcare company, Livongo. Livongo build software that helps patients and doctors manage chronic conditions (primarily diabetes). Investors initially reacted badly to the merger, with both stocks taking a price cut. Since then the stock has moved sideways. However, in early September the company quietly released an updated presentation that revised upwards the expected growth of the joint company, showing the management teams confidence. Both companies have seen huge increases in stock price year-to-date, with Telemedecine clearly a huge beneficiary of the current environment. The long term goal to digitise the healthcare industry is clearly very future relevant and the combined entity is well placed to capitalise.
Opportunity - Teladoc estimate that the total addressable market for the combined company is $121b. Overall healthcare spend in the US alone is significantly bigger, so the long term investor can see continued expansion. As well as its primary physician service, Teladoc also offer virtual counselling for mental health. The acquisition of Livongo, specialising in chronic conditions, compliments their existing on-demand services very nicely.
Financials & Performance - Revenue growth accelerated to 85% in the last quarter. Before that, revenue growth had levelled at around 25-30%. Gross margins have consistently been just under 70%. The company is not yet profitable as it continues to invest in growth, in 2019 announcing they are active in 130 countries with 27 million members.
Risks - Healthcare is a large opportunity that will surely attract a lot of competition. Both Apple and Amazon have been eyeing up offerings in the space. Specifically relating to the merger - it needs to be approved by the competition authorities (although doesn’t seem at risk) and the planned synergy needs to be successfully executed.