Is There Opportunity in Teladoc?

Editor’s note: Read the latest on how the coronavirus is rattling the markets and what investors can do to navigate it.

Andrew Willis:

Some of the most successful stocks in the pandemic have soared as services went online. Zoom, Shopify, and Amazon solved our communications and consumer needs--but what about our

health

?

Enter Teladoc TDOC, a leading provider of virtual healthcare technology. The company provides online doctor consultations alongside a suite of software that offers ongoing care in fields like cardiology, diabetes, weight, and mental health management.

Amidst a massive medical crisis, it’s surprising to see Teladoc still trading around our fair value estimates--forgoing, so far, the same level of hype that we’ve seen inflate other pandemic-related stocks to unrealistic valuations.

One of the main reasons is our increased confidence in the staying power of growth achieved, beyond the pandemic. Equity analyst Soo Romanoff says the acquisition and integration of similar online health-service providers InTouch and Livongo went better than expected, offering diversification of services and new growth opportunities. And the company’s subscription-based revenue model is set to recur yearly at around 80%!

As of late last year, the company had more than 54 million members and 50,000 licensed providers, allowing it to match patients within 10 minutes of requesting care or a consultation. These kinds of game-changing figures have us raising our fair value estimate by around 23% to $225 U.S. dollars a share.

With an aging North American population, ongoing mobility restrictions, and opportunities to improve the acceptance of telemedicine insurance coverage with the new U.S. administration, we think this company’s in good shape.

For Morningstar, I’m Andrew Willis.