As I write this, Teladoc Health (NYSE:TDOC) is one of the top large-cap stocks in 2020. While the major indices have headed south, TDOC stock has gained a sparkling 66%.
To be sure, the novel coronavirus accounts for some of the buying. One need only look at the other top-performing companies with market capitalizations over $10 billion.
But TDOC stock is much more than just a pandemic play. This crisis hasn’t created the company’s opportunity. It’s simply made it more clear, while potentially accelerating the timeline.
Indeed, I’ve been recommending Teladoc Health stock for years now. The stock has more than doubled. But I still believe there’s more upside ahead.
The Telehealth Opportunity
To be sure, the Covid-19 pandemic is quickly expanding the adoption of telehealth. As MarketWatch noted last month, Anthem (NYSE:ANTM) has made more doctors available for its telehealth service. UnitedHealth (NYSE:UNH) has done the same.
It’s not just health insurers. The federal government is backing telemedicine as well. President Donald Trump’s administration last month expanded coverage for Medicare recipients. That follows previous moves that allowed for so-called virtual check-ins.
Private and public insurers thus are pushing U.S. consumers toward telemedicine. The same trend will hold in Europe and in Asia.
What’s important to remember is that the trend won’t cease when this crisis passes. Doctors will become more comfortable with telehealth options. Patients will appreciate the ease of use and time savings created by virtual visits.
The shift to telemedicine was going to happen anyway. That’s why I recommended TDOC stock long before this crisis arrived. But the shift is gaining a huge push — and it’s Teladoc that can take advantage.
The Industry Leader
After all, Teladoc by its estimates has 75% market share in U.S. telemedicine. Though there are startups looking to compete, there isn’t another company with the size and scale of Teladoc Health. In fact, there isn’t really a publicly traded competitor out there.
That’s huge. Online services traditionally have been “winner take all” or at least “winner take most” markets. Think Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) in search or Amazon (NASDAQ:AMZN) in e-commerce.
That structure is why startups over the last decade have executed so-called “blitzscaling” strategies. It’s why Uber (NYSE:UBER) blanketed the world with free rides and driver subsidies. Once dominance is secured, significant profit margins can follow.
To be sure, that strategy hasn’t yet worked for Uber, whose stock has slid and whose earnings are still negative. But Teladoc Health hasn’t had to spend billions of dollars to secure its massive share.
Teladoc still is unprofitable — but modestly so. It’s spending to build out its platform and acquire both doctors and patients. Unlike Uber, its long-term profitability isn’t really in question.
Nor is its leadership in the space. Teladoc dominates the U.S. market. It has an impressive worldwide reach as well. According to the most recent Form 10-K filed with the U.S. Securities and Exchange Commission, Teladoc serves more than 175 countries in over 40 languages.
And so as telemedicine takes off, so will Teladoc Health’s revenue and profits.
Buy TDOC Stock on the Fade
To be sure, TDOC stock isn’t cheap. But it shouldn’t be. Companies with massive opportunities are not going to be offered at a discount.
Meanwhile, the stock has pulled back in recent sessions. That fade perhaps isn’t surprising. As hopes have grown for a near-term peak in coronavirus cases, investors have shifted over to “cheap” beaten-down names in sectors like energy and retail. Pandemic plays like TDOC and ZM have retreated. (Zoom, of course, has some external factors at play).
But, again, this isn’t a short-term buy. It’s a long-term winner. And so I don’t put much stock in trading over a handful of sessions.
If anything, I’d love to see the stock decline further — because this is a stock that investors can and should hold for the long term. The current crisis may have alerted investors to the opportunity in TDOC stock. But the market still hasn’t come completely around to just how large, and profitable, that opportunity will be.
Matthew McCall left Wall Street to actually help investors — by getting them into the world’s biggest, most revolutionary trends BEFORE anyone else. The power of being “first” gave Matt’s readers the chance to bank +2,438% in Stamps.com (STMP), +1,523% in Ulta Beauty (ULTA) and +1,044% in Tesla (TSLA), just to name a few. Click here to see what Matt has up his sleeve now. Matt does not directly own the aforementioned securities.