Teladoc Health, Inc. (TDOC) is recognized as a world leader in virtual care. The company provides virtual access to care with a portfolio of services and solutions that include various medical subspecialties, from non-urgent, episodic needs, such as flu and upper respiratory infections, to chronic, complicated medical conditions, such as cancer and congestive heart failure. The company’s consumer brands, including Teladoc, Advance Medical, Best Doctors, BetterHelp, and HealthiestYou, provide access to advice and resolution to a range of healthcare needs.

With a first-mover advantage in the virtual healthcare space, the company’s growth has been accelerated by growing demand for telemedicine services amid the coronavirus pandemic. The stock has rallied nearly 152% over the past year to close yesterday’s trading session at $197.83. However, with the deployment of coronavirus vaccines, investors have started rotating out of stay-at-home stocks. Because it is perceived as one of those stocks, TDOC has declined 6.7% since December 23.

Further, with speculation in the market regarding the potential for Amazon.com, Inc. (AMZN) to expand its app-based health services, the Amazon Care Service, beyond its Seattle-based employees, investors are concerned about the intense competition this could spell for TDOC.

American Well Corp. (AMWL), which went public on September 16, could also pose a strong competition for TDOC. These factors and their reflection on TDOC’s stock price have made our proprietary rating system  rate the stock as “Neutral.”

Here is how our proprietary POWR Ratings system evaluates TDOC:

Trade Grade: C

TDOC is currently trading above its 50-day moving average of $193.04, but below its 200-day moving average of $206.14. This indicates a moderate uptrend. Further, the stock has gained 11.6% over the past month, which does not indicate short-term bullishness.

The company’s revenue has increased 109.3% year-over-year to $288.8 million for the third quarter ended September 30,2020. Access fees revenue, which accounted for 78.5% of the company’s total revenue, has increased 90.2% year-over-year to $226.6 million. And total visits have increased 205.5% year-over-year to 2.8 million. However, TDOC incurred a net loss of $35.9 million in the quarter.

On December 22, the World Telehealth Initiative (WTI) announced that it has received an investment from Intel Corporation (INTC). WTI now plans to leverage TDOC’s virtual care enablement platform to expand access to care worldwide. TDOC announced on October 30, that it has completed a merger with Livongo, a Mountain View, Ca. company that provides managed care for chronic illnesses. The combined company is the only consumer and healthcare provider partner to span a person’s entire health journey.

Buy & Hold Grade: C

In terms of proximity to its 52-week high, which is a key factor that our Buy & Hold Grade considers, TDOC is positioned unfavorably. The stock is currently trading 21.8% below its 52-week high of $253, which it hit on August 4.

Partly because TDOC has been expanding its client partnerships with industry leaders, its net revenue has grown at a CAGR of 64.9% over the past three years.

Peer Grade: D

TDOC is currently ranked #40 of 71 stocks in the Medical – Services industry. Other popular stocks in the medical – services group are Veeva Systems Inc. (VEEV), Amedisys Inc (AMED), and DaVita Inc. (DVA).

With a 151.9% gain, TDOC has beaten the returns of these popular industry participants over the past year. VEEV, AMED, and DVA have gained 103%, 76.2% and 54.5%, respectively, over the same period.

Industry Rank: B

The Medical – Services industry is ranked #40 of 123 StockNews.com industries. The companies in this industry provide a range of skilled nursing and other health care services, personal care services, distribution of prescription drugs, over-the-counter medicines, and related products.

People worldwide have become more aware about their health with the advent of the pandemic. Companies in this industry have also developed innovative products and services to reach consumers in an easier, more efficient way. As such, this industry is expected to see sustained growth even in a post-pandemic market, based on growing awareness and technological advancements.

Overall POWR Rating: C (Neutral)

TDOC is rated “Neutral” due to its bleak outlook and modest price performance in the short term, despite having positives such as the launch of new services, and strategic partnerships with industry leaders, as determined by the four components of its overall POWR Rating.

Bottom Line

While TDOC has been expanding its business profile with organic and inorganic growth initiatives, it has yet to reach break-even point in profitability. Moreover, the telehealth market is witnessing the emergence of new and stronger players, which might provide stiff competition to incumbents like TDOC, which are still in a fragile and in their early growth phase.

The consensus revenue estimate of $1.96 billion for next year indicates 80.9% year-over-year growth. However, TDOC’s EPS is expected to decline 3.8% in the current quarter ending December 31, 2020, and 2.9% this year.

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TDOC shares were trading at $199.54 per share on Tuesday morning, up $1.71 (+0.86%). Year-to-date, TDOC has gained 138.34%, versus a 18.27% rise in the benchmark S&P 500 index during the same period.

About the Author: Manisha Chatterjee

Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst. More...

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