Teladoc; Investments in Future of Medical Services
I feel unwell today. This means, I should go and see the doctor.
This very thought made me feel even worse. I imagined the two options I had.
The first one is doing your best to get an appointment with your physician that has dozens or perhaps hundreds of patients like you. The other option is going to the hospital, waste your time on queues, and in the end spend even more money on getting the necessary help.
Any of these options presumes spending your time, which is the most precious resource you have. You can neither stop it, nor borrow, nor earn. Hence, if there is an option to see the doctor without wasting time, anyone who is serious about this resource will use the option. Well, in fact, it exists.
In the world of IT, one can consult the doctor online. While now this is available via Zoom or Skype, in the future, you will be able to see your doctor in the metauniverse. In this case, you will spend the least time. Another advantage is that you will stay at home and neither spread your illness nor will catch new ones.
Who provides such services? One of the most famous public companies working in the segment is Teladoc Health (NYSE: TDOC). In this article, I will tell you what this company is and who invests billions of dollars in it.
Teladoc Health, Inc. is a transnational telemedical company with the headquarters in Purchase, NY, USA. It was founded in 2002 by Doctor G. Byron Brooks and a businessman Michael Gorton.
The company gives access to consultations with licensed medical workers. Teladoc makes the most of its money on monthly subscriptions of companies that pay for privileged access of their employees to medical services.
For enterprises, such cooperation is good because employees can “visit” the doctor during workday if they have any symptoms of diseases. If the treatment does not presume a day off, the company and the employee save the rime that would otherwise have been spent on going to the doctor offline.
In 2002, Teladoc used to have no rivals: it was the pioneer of the market of online medical services with a unique technology. This way, by 2007, it had formed a client base of about 1 million people that included employees of the US largest companies.
If there is demand, we will have supply. As a result, Teladoc did have competitors, and to fight them, it chose the way of engulfing, increasing its market share and stepping outside the USA.
In 2015, the company carried out an IPO and become the first public telemedical company in NYSE. Its shares started trading at 30 USD each, then reached the high of 35 USD, and then slumped into a lengthy decline until March 2016.
The reason for the decline was a draft bill in the state of Texas that forbade providing online medical services to those patients who has not yet visited the doctor in person. By that moment, the number of Telados patients in Texas had reached 2 million people. This made investors doubt about the bright future of the company, which caused a negative effect on the share price.
Telados did not pass the draft bill by unnoticed and went to court, claiming that the draft bill breached the antimonopoly law. Simultaneously, Telados lobbied its interests. In the end, Telados dropped the claim, while the bill was passed in a different form that allowed remote consultations without actual visits to the doctor.
Now Telados provides its services in 130 countries all over the globe, serving 40 million subscribers.
The company enjoyed special attention of investors during the pandemic, when quarantine measures were imposed everywhere, and visiting the doctor was a problem and dangerous. Over this period, the company increased its quarterly revenue from 150 to 522 million USD, and the share price – from 80 to 300 USD. When the agitations subsided, the share price started falling.
Then investors noticed that in 2020, losses of the company grew 10 times. Experts added more oil to the flames, decreasing the rating of the company.
However, the lowest target share price of Telados is still 35% higher than the actual market price and amounts to 135 USD. The sharp increase of losses is explained by buying Livongo Health for 18.5 billion USD.
Livongo Health provides online consultations to people with chronic diseases. Demand for its services grew noticeably during the pandemic because most of Livongo patients are elderly people, who preferred online “visits” to offline ones in order to minimize the risk of catching COVID-19.
After the merger of Teladoc and Livongo, the first one doubled in size. Currently, the new company is still adapting to new conditions, and huge sums are spent on this. However, the net loss of Teladoc has still decreased 5 times, amounting to 84 million USD. Hence, for Teladoc, making a net profit is just the matter of time.
However, there was one more reason for Teladoc shares to fall. The pandemic has somewhat subsided, and the management forecasts that in the quarters to come the growth of revenue will slow down, which is quite natural because a part of client will return to offline medical services. However, there will be those sticking to online visits.
The growth of revenue will slow down but not drop to zero. If earlier the company reported growth of revenue by 140-150%, now it reports 80% growth, which is still a lot.
Note that I found no recommendations of experts to sell Teladoc shares. The only argument was that using Teladoc services, the patient always encounters different doctors, which is not really good because the patient has to tell their story from the beginning every time, and the doctor and patient do not form lengthy trusting relationships. Patient would rather consult those doctors who have already helped them.
Teladoc knows there is such a problem, and just recently has launched the Primary360 program so that the patient can choose the doctor they want to address, and if the doctor is busy, they can make an appointment. So, constantly changing doctors is no more a problem of Teladoc.
I have already said that found no publications that advise selling Teladoc shares, while articles that mention buying the shares are quite abundant. Just check the news feed of Yahoo Finance. Teladoc is among the most attractive companies for long-term investments.
Moreover, the famous Cathie Wood also buys Teladoc shares. In November 2021, she bought 476,000 shares of the company for over 50 million USD. Totally, she owns more than 17 million shares of the company for 2.7 billion USD.
In Cathie Wood’s portfolio, Teladoc is number two after Tesla (NASDAQ: TSLA), taking up 5% of all the assets there.
Here you have a hint on what large market players buy.
Let us now take a look at the chart of the company.
The picture is sad, though there are hopes for further growth and development of the company. However, looking on the chart, it is hard to find any confirmations.
Firstly, Teladoc quotations are trading under the 200-days Moving Average, indicating a downtrend. The company has dropped by 200 USD from the all-time high. This is a decline by over 60%, which is a very serious slump.
There is only one conclusion to be made from the situation. All negative events, which are not too plentiful, are already included in the price. Perhaps, this is why Cathie Wood buys Teladoc shares so actively.
Last time the shares traded at 100 USD at the beginning of 2020, i.e. before the crisis. Now the revenue of the company is 3 times higher than in 2020, so, Teladoc shares can be called oversold.
However, even in such circumstances, I advise against rushing at the shares. Cathie Wood can afford to buy the shares on the decline, and she does this actively, decreasing the average entry price. As for us, we aim at buying the shares in such a way that the subsequent decline would be minimal. So, we need to wait for any hints of recovery on the chart. Thought we will not catch the point of reversal, we will minimize the probability of a drawdown.
So, a possible reversal signal will be a breakaway of the resistance level on 120 USD. This will be the first and weakest signal. Then the price needs to rise over 160 USD. This breakaway will coincide with the 200-days MA, signaling the beginning of an uptrend. This will be the second and strong signal to buy Teladoc shares.
If you still wish to buy the shares at the lowest point, think about buying them at the test of the support level around 90 USD. This will be the third, the riskiest, but perhaps the most profitable way of buying Teladoc shares.
While I was writing this article, I recalled the invention of a smart toilet for gathering medical tests. Also, I thought about the AI that makes a diagnosis based on symptoms. AI is already used in Teladoc – they only need to add toilets to their network that would send the data to the company, where a diagnosis would be made based on the data received, and medical workers would inform the patient. Here is the perfect future for us.
The patient will be informed about an upcoming disease, take measures, and avoid complications. And the company will make money.
If this is the future for us, Teladoc will be a beneficiary. Moreover, this company is likely to be the one to introduce such treatment schemes. From this viewpoint, billions spent by Cathie Wood on these shares look like a wise investment.
The idea is long-term but the chances for a profit are high.
Invest in American stocks with RoboForex on favorable terms! Real shares can be traded on the R StocksTrader platform from $ 0.0045 per share, with a minimum trading fee of $ 0.5. You can also try your trading skills in the R StocksTrader platform on a demo account, just register on RoboForex and open a trading account.