With people staying at home as much as possible in this new era of social distance, Teladoc Health (NYSE: TDOC) sees the demand for its virtual healthcare services skyrocket. The company skyrocketed in 2020: Sales have grown at a rate of 85% this year, while the share price is already more than 150%.
With such numbers, investors may wonder if it is too late to invest, and if they are missing the boat on this red-hot stock. However, let’s take a closer look at how the New York – based company has performed this year, whether it can continue its impressive growth, and if the stock is still a good buy.
Is Teladoc’s growth too slow?
In the results of the second quarter of Teladoc, released July 29, revenue rose to $ 241 million, up from $ 130.3 million in the previous year. When it published its first quarter results in April, Teladoc projected the second quarter to reach a high of only $ 225 million. It also projected total virtual visits to reach up to 2.4 million. The company blew through these figures, recording 2.8 million total visits during Q2. US paid memberships of 51.5 million at the end of the quarter were also better than the 49 million to 50 million that Teladoc expected.
Image Source: Getty Images.
However, the company is not getting its hopes up for the third quarter, especially with many states no longer under lockdown. It estimates that their quarterly visits will drop to 2.5 to 2.7 million. And while it expects sales to be as high as $ 285 million, that would be a quarter-over-quarter increase of 18% – nowhere near the 33% jump it took from Q1 to Q2.
On its own, Teladoc is likely to slow down the growth rate simply because it is difficult to keep growing sales at a high rate, especially as the company gets bigger and bigger. And in the long run, once the pandemic is over and people return to visit their doctors in person, there is a potential for a drop-off in the number of users making virtual visits through the Teladoc platform. This could also reduce the company’s growth rate over time. But with the recent turnaround and downfall of Teladoc, the company’s growth rate may actually accelerate in the very future.
Mergers and acquisitions could unlock much more potential
On July 1, Teladoc completed its acquisition of telehealth company InTouch Health.
The main advantage for Teladoc is the ability to take advantage of the InTouch network. InTouch has partnered with more than 14,500 physicians worldwide and 4,500-plus hospitals and healthcare systems. As of the end of 2019, Teladoc will serve more than 300 hospitals and healthcare systems. By expanding its reach and creating more growth opportunities, the acquisition Teladoc can continue to build on its strong sales numbers.
However, that could be a drop in the bucket compared to what the recently announced merger between Teladoc and Livongo Good health (NASDAQ: LVGO) can mean for the future of the company. The deal is worth about $ 18.5 billion, and could help Teladoc not only grow sales but also expand its products and services.
One major focus area for Livongo is treating people with diabetes. In its most recent quarterly results, released August 5, the California-based company reported that more than 410,000 people were enrolled in its Livongo for Diabetes program, making it easy for patients to follow their glucose readings online and communicate with health coaches. That is an increase of more than 113% from the previous year. And Livongo’s are also enjoying strong sales numbers amid the pandemic, with their Q2 sales increasing 125% from the previous year’s period.
Combined, the two companies could be a force in the healthcare sector. The companies expect the deal to close in the fourth quarter.
Should You Buy Teladoc Today?
Investors were not excited about the news of a merger with Livongo, as shares of Teladoc fell 18.9% the day the news broke. But that’s still a small dent in an otherwise strong year for the company. Both stocks grew in 2020:
TDOC data by YCharts
With Teladoc shares falling in value in recent days, now may be the perfect time to buy this top-notch healthcare product on the dip, as years from now the investment may seem like a steal of a deal. With two high-growth companies joining forces, the combined company was able to deliver strong growth numbers in the coming years, and that makes Teladoc a great share to buy right now.
