The tele-health company soaring as we trade in GP visits for teleconferences
While the outbreak of the COVID-19 pandemic has caused (and is still causing) extreme market volatility, it has also highlighted the importance of the health and medical services sector around the world.
In a completely changed world, forced into lockdown for weeks on end, virtual services - from streaming music and movies through to virtual meetings and online education - have suddenly become the only means of access to services and information for millions of people.
Of course, it's not only entertainment and information companies that are enjoying a boom in their business amid the COVID-19 pandemic.
Another area that is benefiting greatly from the availability of online technology is medicine. Telemedicine or remote health service delivery, which only a few years ago was being baulked at by many people, is now skyrocketing.
Teladoc Health (NYSE: TDOC), a New York-based provider of virtual medical care and consultation, has reported an unprecedented surge in demand for its services in recent weeks.
According to a company statement, Teladoc is now routinely providing more than 20,000 virtual medical visits per day in the US alone. This figure represents an increase of more than 100% compared to the first week of March, according to the statement.
There's no doubt that the COVID-19 pandemic has contributed to the surging demand for virtual medical consultations. This growing demand has pushed Teladoc's share price to the US$200 region in late April 2020.
Share performance to date
Looking at Teladoc's share price movement, it was only one year ago, in April 2019, that the stock traded below US$50 per share. With prices closing in on the US$200 level in late April 2020, the stock has posted gains of almost 300% in just one year.
While there appears to have been an acceleration of the upward trend in recent weeks, a longer-term view reveals that recent gains have simply been a continuation of underlying strength. Four years of gains, since May 2016, have seen the stock rally from less than US$10 to the current highs. This is a remarkable 20-fold increase in price.
Jason Gorevic, chief executive officer of Teladoc Health, said in a recent interview: "The Teladoc Health team and platform are performing extremely well as more consumers, employers and hospital systems rely on us during this unprecedented time.
"Virtual care is playing a central role during this crisis when the traditional healthcare system is under intense pressure, and I am confident that role will only continue to expand."
Who is Teladoc and what does it do?
Teladoc Health, Inc. is a multinational telemedicine and virtual healthcare company founded in the US state of Texas in 2002 and held its initial public offering (IPO) in July 2015. The company's original business model allowed patients to remotely consult with state-licensed doctors at any time.
Over the years and after several acquisitions across the globe, Teladoc has expanded its services to include:
- Telehealth using telephone and videoconferencing software as well as mobile apps to provide on-demand remote medical care
- Medical opinions
- Artificial Intelligence and analytics
- Licensable platform services
Listed on the New York Stock Exchange (NYSE), Teladoc had a reported market capitalisation of US$4.1 billion in 2018 (now at US$14.4 billion). In 2019 the company reported its presence in 130 countries serving around 27 million members/patients.
Teladoc reported some healthy numbers during its most recent financial update:
- Anticipated revenue for Q1 of 2020 to be in the range of US$180-181 million, compared to $129 million in the first quarter of 2019.
- Adjusted EBITDA for Q1 is expected to be in the range of $10-11 million, compared to $1.2 million in the first quarter of 2019.
- Total visit volume is expected to exceed 1.8 million visits in Q1 of 2020, representing growth of approximately 70% as compared to Q1 of 2019.
Though it is too early to say when (or if) a vaccine for COVID-19 will be found and what the extent of its impact on businesses and the global economy will be, Teladoc is due to issue an updated financial outlook on Thursday, Australian time.
What's contributing to the demand for virtual medicine?
The demand for virtual care visits has accelerated as several health plans have waived consumer cost-sharing and public health officials at all levels of government have encouraged the public to take advantage of virtual care services. These actions have driven many people to use telemedicine for the first time.
Using Teladoc's virtual medicine app, medical professionals and patients can communicate without physical contact.
What are analysts saying about Teladoc?
As people are encouraged to stay home and avoid unnecessary physical contact with other people, they are also being advised to make use of available technology for medical consultation.
Market analysts covering the healthcare sector agree that the COVID-19 pandemic has made telehealth a hot topic. However, as people adapt to the convenience of the new technology, there is a strong likelihood that this transition to telehealth will persist even once the current pandemic recedes.
According to an analyst covering the healthcare sector, "the global spotlight on telehealth has lit a fire under Teladoc stock", but even before COVID-19, the analyst pointed out that Teladoc's revenue had been growing at a rapid clip. It grew at a 55% compound annual growth rate (CAGR) from the company's IPO year of 2015 through 2019.
Another analyst also pointed out that compared to the recent gains of other stocks receiving a boost from the COVID-19 situation, Teladoc has been building on top of share price gains that have been achieved over several years. It just so happens that COVID-19 has greatly increased the company's profile this year.
With scientists and market analysts predicting the social distancing will be a norm even after the lockdowns are lifted, virtual medical consultations and contactless interactions will continue to boost Teladoc's offerings.
Another healthcare industry report mentioned that even before COVID-19 Teladoc already had a large and expanding customer base.
"Around 40% of the Fortune 500 companies use Teladoc's services along with thousands of smaller organisations. But Teladoc has a lot of room to grow just with its existing customers," the report said.
Outlook for the industry and Teladoc
Whether a vaccine for COVID-19 is found soon or not, the lockdowns and social distancing imposed on people across the globe have made an impact on the way people will interact long after the pandemic ends.
While the boost in demand for some sectors may prove to be temporary, it appears likely that the convenience and safety of the virtual medicine/telehealth industry will experience continued growth.
Given Teladoc's global presence and depth of offering and technological network, we believe it is a buy (COVID-19 or no COVID-19).