Teladoc Inc Stock Is Locked into Growth as the Future of Healthcare

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Teladoc Inc (NYSE:TDOC) is seen by many as a presence that can transform the nature of healthcare delivery. The company offers health services through one’s computer, tablet or smartphone. With its acquisitions and business relationship, it’s working to become the premier telehealth company.

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Growth in the price of TDOC stock has paused after a tripling in a 13-month period. However, with better than expected revenue growth and a dominant market share, TDOC stock presents investors with an opportunity to enter a lucrative field at an early stage.

Teladoc Helps Patients Save on Healthcare

The value proposition for Teladoc remains compelling. Customers can have a virtual visit with a doctor 24 hours per day, 7 days per week. Moreover, a basic visit with Teladoc costs as little as $40. This compares with an average starting cost of $130 at a doctor’s office. Wait times average fewer than 10 minutes, which means workers can see a doctor anytime while taking less time off from work.

Employers understand the benefits of this service well. The company has over 7,500 business clients, including more than 250 of the Fortune 1,000. This adds up to over 20 million members. Additionally, the company claims the 952,000 visits in 2016 saved clients $493 million in lower costs and increased productivity.

TDOC also maintains a strong market position, holding a market share of about 75% in the telehealth industry. The company also has made key acquisitions to maintain their moat. It’s the cost of these acquisitions that strengthen its market position.

Earnings Losses Weigh Heavily on TDOC Stock

However, the cost of acquisitions weakens their financial position. It’s also a likely drag on the TDOC stock price, which has been stuck in a $29-$37 per share range since May. The purchase of Best Doctors in July enhanced the company’s ability to treat more complicated conditions, which widens the company’s moat. It also cost TDOC $440 million in cash and stock. This is a large purchase for a money-losing company with a $1.8 billion market cap.

Hence, investors will also have to exercise patience for the value proposition to translate into profits. The Q3 earnings report offered a mixed picture. Earnings per share (EPS) missed estimates by two cents, coming in at a loss of 55 cents per share. Of the analysts who cover this stock, none predict positive earnings before 2020, and even for that year, consensus EPS stands at a 24-cent loss per share.

But Revenue Growth Is Too Large to Ignore

Still, long-term forecasts are calling for an average 20% per year growth rate for earnings. Companies such as Tesla Inc (NASDAQ:TSLA) have offered outsized gains to stockholders on high revenue growth and market leadership.

Revenue growth is one area where TDOC stock has performed well. Revenues came in at $68.65 million, 112% higher than last year. They also beat estimates by over $1 million. The best case for buying TDOC stock is that very growth, along with the future of the market. Teladoc estimates the size of the potential telehealth market at about $29 billion. The company also estimates the market to be less than 1% penetrated.

Additionally, the productivity gains are enormous. Employers will lose less productivity over workers visiting doctors during business hours. Also, the much lower cost of a virtual visit versus a live office visit provides an additional benefit. Moreover, the company remains focused on maintaining and expanding its moat. With acquisitions such as the one with Best Doctors, TDOC maintains a competitive advantage over another company setting up a call center and hiring a few doctors. And with fees as little as $40, the company has room to increase fees without losing business.

Final Thoughts

Despite financial risks, investors could witness outsized gains by buying TDOC stock. Teladoc holds a 75% market share in a market that’s <1% penetrated. Also, with lower costs and the ability to see a doctor without missing work, millions of patients will turn to telehealth instead of the live office visit. Also, with the company’s investments in the best personnel and technology, TDOC has a competitive advantage in offering better care to patients. Assuming the company can maintain both the growth and the company’s moat, customers may one day talk about Teladoc for doctor visits in the same way they talk about Amazon.com, Inc. (NASDAQ:AMZN) for shopping, or Netflix, Inc. (NASDAQ:NFLX) for movies.

As of this writing, Will Healy is long TDOC stock.


Article printed from InvestorPlace Media, https://investorplace.com/2017/11/tdoc-stock-future-healthcare/.

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