Teladoc: Healthy Gains in Telehealth

04/04/2017 2:50 am EST


Michael Cintolo

Vice President of Investments and Chief Analyst, Cabot Heritage Corporation

Teladoc (TDOC) is small company with a very interesting story. The company is the hands-down leader (about 75% market share) in the telehealth industry, explains Mike Cintolo, growth stock expert and editor of Cabot Top Ten Trader.

This sector has mass market appeal to consumers, who are able to talk or video chat with a board-certified doctor within minutes, and get a drug prescribed if needed.

It also has mass market appeal to businesses (huge boosts in productivity as employees don’t spend half the day going to and waiting to see a doctor) and the medical health industry (lowers costly ER and doctor visits, thus cutting health spending).

Teladoc has raced out to the lead in the sector thanks to its 220 Fortune 1000 clients, its scalable software (it handled 5,000 daily calls with no problem last November) and lots of marketing spending, which has kept the bottom line in the red.

But the industry should end up being many times larger than it is today, and with customer satisfaction north of 90% and with clients using more of Teladoc’s services over time, acquiring as many customers as possible now makes sense, especially with newer niche tele-services like behavioral health and dermatology proving popular.

About 80% of revenue comes from monthly subscription fees, with the rest from “visits.” In the fourth quarter, revenues surged 65%, total membership rose 43% (to 17.5 million) and total visits rose 68%, and management sees more of the same ahead, including hitting cash flow breakeven by the fourth quarter. We like it.

TDOC came public in July 2015, and promptly plunged from a high of $35 to a low near $9 last March, a huge post-IPO droop. A rally ensued, but the stock then consolidated in the upper teens from September through December.

The new year brought a push to new highs, and after a quick shakeout two weeks ago to its 50-day line, TDOC has surged to multi-month highs. It’s thinly traded, so keep positions small and look to buy on dips.

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