A bear market never feels fun amid the pain. However, deflated investor sentiment provides an opportunity for speculators to pick up strong names at fire-sale prices. Such is the case with innovative healthcare firm Teladoc Health (NYSE:TDOC). Despite its potential to dramatically change patient care, Teladoc stock has suffered steep declines.
In many ways, the groundbreaking organization is purely a victim of the broader market meltdown. Since its inception, Teladoc has jumped to fame through its distinct platform, which connects licensed medical practitioners with patients. Through the internet, phone, or mobile app, people can immediately receive a diagnosis and counsel from home.
Given this powerful opportunity, it’s no wonder that TDOC stock captured investor attention. The company enjoyed breakout success in 2017, where shares more than doubled. For the most part, 2018 was also on track to deliver a positive surprise. Between January through the end of September, TDOC had gained over 146%.
But between October to the end of 2018, TDOC suffered an ignominious drop, shedding nearly 43%. Overall, the healthcare firm brought home a very respectable 41% return. Still, I’m sure more than a few shareholders have pondered the missed opportunity.
From an outsider’s perspective, TDOC presents a clear-cut example of a good company stuck in a bad market. Presumably, without the broader meltdown, shares would have trekked higher. In that case, the present weakness in the innovative company is a perfect contrarian opportunity.
But is that really what we’re looking at? Both bulls and bears have a strong case. Let’s first examine the optimist’s perspective:
Teladoc Could Change Healthcare
One of the biggest contributors for a rising price in TDOC stock is that no one likes doctor visits. Of course, they’re necessary for maintaining optimal health and for preventing problems from escalating into more serious situations.
But at the same time, the reason that you’re seeking medical advice usually creates tension. With TDOC’s services, you can receive a diagnosis from the comfort of your own home. Moreover, a psychological study revealed that 3% of the U.S. population have a fear of doctors.
Teladoc potentially helps alleviate stress among people who are uncomfortable visiting a doctor. Just as important, the network helps promote quick and easy communication between patients and practitioners. This fosters greater health among the population through preventative strategies. Naturally, this dynamic is net positive for Teladoc stock, creating a win-win for all involved parties.
While the company will likely spark holistic benefits for American healthcare, Teladoc remains primarily a business. Fortunately, business is good. According to a Transparency Market Research report, the worldwide “telehealth” industry will hit sales of $19.5 billion by 2025.
To be fair, this doesn’t sound like much against the healthcare behemoth. But the telehealth sector has the most potential to branch out. For instance, its internet-diagnosis method easily crosses borders where physical and political impediments exist.
Another factor bolstering the case for Teladoc stock is timing. Increasingly, medical care is becoming personalized. Outside of obvious profitability interests, this trend has influenced non-healthcare companies like Walmart (NYSE:WMT) and Amazon (NASDAQ:AMZN) to participate.
Moreover, these retail giants are indirectly imposing a certain mentality to healthcare. Both Walmart and Amazon emphasize convenience at the lowest possible price. TDOC offers the same ethos, but for the doctor-patient relationship.
Don’t Ignore the Risks for Teladoc stock
On surface level, the bullish case for TDOC stock appears like a no-brainer. We have a groundbreaking company levered towards a rising, in-demand industry. The only reason that shares have fallen is due to ugliness in the major indices.
But don’t jump onboard Teladoc stock before you examine the other side. Off the top of my head, a potentially-significant headwind is the barrier to entry. Put simply, Teladoc doesn’t have a moat to fend off copycat competitors.
The most valuable asset that TDOC enjoys is its network of medical experts and practitioners. Yes, I’m sure the company technically has proprietary methodologies it employs for its communication platforms. But web and mobile channels are not what drives Teladoc stock, but rather, the doctors. As such, the organization remains vulnerable.
For healthcare specifically, Teladoc is not a universal panacea. Doctors require hands-on sessions with their patients to extract an accurate diagnosis. Of course, we all know that no profession is perfect. Logically speaking, though, the possibility of a misdiagnosis increases dramatically when the doctor can’t really “see” the patient.
This headwind segues into another problem, regulation. Although strict guidelines for any medical function exist, telehealth uniformity at the state and national levels does not. Unless we start seeing legislative consensus, multinational corporations probably cannot benefit from this sector’s innovations.
Plus, you’re diving into an area where lawsuits based on misdiagnoses could upset the whole environment. Thus, Teladoc stock is by no means an easy investment.
Bottom Line for TDOC stock
Looking at both sides of the issue, I like TDOC. I believe that the innovations that could change healthcare for the better overcome the risks.
That said, I’d urge caution. This is what I would call a “60/40” bull case. Ultimately, the optimists should drive Teladoc stock higher from its current doldrums. However, if you make significant profits, I’d trim exposure. Regulatory hurdles are nasty and can take a long time to resolve.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.