I received this question off-board and thought it was worth responding here. I’m also curious to see if any other LVGO holders care to chime in.
I have a question about Livongo and wanted to get your thoughts. From your monthly report Livongo is a high confidence holding and I can see why based on their metrics from last quarter. However, I’ve been thinking about the recession and how it could affect livongo for this coming quarter and through the current recession (my personal guess is it’s gonna last at least a year and likely longer). If we’re seeing record job losses and consequently people losing their health insurance, would it be fair to reason that livongo’s business could experience a significant slowdown starting next quarter? Their last quarter ended at the end of March so their numbers probably didn’t reflect much if any of the recession at that point. Livongo used to be a high conviction stock for me but my concern for people losing their jobs/health insurance has me thinking if i should take some of my money in livongo and diversify into a stock that might have a better chance of thriving during the recession such as Fastly.
What are your thoughts on how livongo might do during the recession. Do you think my reasoning makes sense or is there a part that i failed to consider. Any insights you could provided is really appreciated.
That’s a valid risk. The counterpoint is LVGO could possibly see even higher adoption from eligible users who ARE still employed since the benefits of remote monitoring and potentially improved health are clearly magnified by COVID. Those with chronic conditions are almost certainly hyper-aware of their options for staying safe right now.
Stepping back, I wouldn’t necessarily anticipate a lot of churn in the number of companies using LVGO. Unless they go bankrupt, they are already committed to offering the service for 2020. To your point however, the number of eligible employees could very well decrease due to layoffs and/or downsizing. I’ll be watching next quarter’s numbers and call comments closely to see if churn is a potential issue. Until then, I don’t believe there’s enough information to make an actionable call.
Please don’t take that as any advice on what you should do with any LVGO shares or whether to switch to FSLY. That is entirely your call. The above is simply my opinion of LVGO’s churn risk at the present moment.
Thanks for asking.