Teladoc drop

Like stocknovice, I was a huge LVGO bull, and it became the best single investment ($-wise) and largest holding of my life, although our reactions to the announced merger have since diverged. Initially, I also was upset with the announcement as I thought LVGO would have continued to outperform on its own (although I think it had gotten ahead of itself). As I researched the merger over the following couple weeks, I came to the conclusion that it’s going to turn out to be a fantastic company/opportunity. We had too many posts about why/why not at that time, so I won’t go into those now, you can search them up if you want. Anyway, I ended up purchasing a couple percent holding of TDOC before the merger completed (mostly to replace the cash/dividend I got from the LVGO shares converting to TDOC) so that it would remain one of my top positions (currently #2, was #3 until ZM stumbled out of the top).

I posted these numbers after the last earnings call but have added my estimates for 4Q20 and 1Q21 in bold italics. I arrived at the LVGO numbers by what I consider conservative QoQ increases (since they did not give guidance with the ensuing merger), and TDOC was from the same $ beat ($4M above the high end) on the company’s Q4 guidance as last quarter, and a guess on my part for Q1.


	Revs	QoQ Rev Gth	YoY Rev Gth
1Q19	$32	    51%	           157%
2Q19	$41	    28%	           156%
3Q19	$47	    14%	           148%
4Q19	$50	     8%	           137%
1Q20	$69	    37%	           115%
2Q20	$90	    30%	           120%
3Q20	$106	    18%	           127%
__*4Q20	$115	     8%	           127%*__
__*1Q21    $150        30%            117%*__


	Revs	QoQ Rev Gth	YoY Rev Gth
1Q19	$129	     5%	            43%
2Q19	$130	     1%	            37%
3Q19	$138	     6%	            24%
4Q19	$156	    13%	            27%
1Q20	$181	    16%	            40%
2Q20	$241	    33%	            85%
3Q20	$289	    20%	           109%
__*4Q20	$308	     7%	            97%*__
__*1Q21    $339        10%             87%*__

Going forward I don’t know if TDOC will be breaking out the LVGO numbers separately, I hope they do for at least a year, until the merger is lapped. Regardless, the above numbers (combined) for the newly merged company would show the following growth from my estimates:


	Revs	QoQ Rev Gth	YoY Rev Gth
__*4Q20	$423	     7%	           105%*__
__*1Q21    $489        16%             96%*__

(Hopefully I don’t have any errors in my numbers.)

So I see tremendous growth being reported for at least the next couple earnings releases. I wouldn’t venture to guess beyond that (with so many variables in play), but I think the market has been waiting for the combined company’s release before they will give it a fair valuation. I think that will come in the next 1-2 releases and I consider the current “depressed” stock price a gift. I also think they have a good chance at beating their upcoming numbers with the cross selling and international opportunities available as they stated they only had 25% overlap in customers at the time of the merger.

Bear stated: …I do think it’s worth pointing out that the market is not seeing what you’re seeing, and usually that means something.

I don’t agree with this statement (that the market is always right). In my experience, I would say the market is “right” on a stock price about 50% of the time, 25% it’s too high, and 25% it’s too low (by “right”, I mean valued where it should be). It constantly overcorrects in both directions. In the last 4-5 years that I’ve been following my stock holdings closely, I could point out numerous examples of this. I’m not saying the market dropping or raising the price on an equity because of some news is wrong, but I’m saying the amount is overdone in quite a few instances, and therein lies the huge opportunity for us as individual investors. It can be news that moves the stock price, sector rotation, going out of favor, consolidating, building a base, many different names for what usually ends up being a short term move that can be taken advantage of.

A couple recent examples:
MDB - currently up 65% in 6 weeks (overcorrected too high currently IMO).
FSLY - dropped to the low $60s (overcorrected too low IMO), currently back up over $100 (up over 60% in 6 weeks).
CRWD - IPO’d around $60 rose to $100, dropped to $30, back up to over $180. I built my position through the entire roller coaster because the numbers/fundamentals here never changed, they have been stellar every report since IPO, and it eventually paid off (my current largest holding), but took time to play out. So if the market is always right (or efficient, whatever you want to call it), why the drop to the $30’s? Never should have happened, but that was my/our opportunity.

And I see the same thing now in TDOC, the market has held the price down too low for the growth the company is and will be showing. Yes, there are a lot of factors currently that will play a role in it’s future price swings. The largest unknown being the CV and vaccines as TDOC is looked at as a COVID stock so it’s price will be impacted by these things. But I think once their next couple quarters of numbers come out, showing triple digit growth (or very close), we’re going to see a jump in the stock price.

I’ve never posted my holdings before because I usually don’t feel I can add much to the amazing conversation and analysis around here, but since I’ve put my 2 cents in on TDOC, you can see below that I have put my money where my mouth is on this one. I very well could be wrong here, but I think the risk/reward is pretty good (do your own DD).

CRWD	17.50%
TDOC	15.04%
DDOG	12.23%
DOCU	10.39%
PTON	8.07%
ZM	7.73%
MDB	5.59%
NFLX	5.09%
AYX	4.13%
ESTC	3.82%
OTRK	3.63%
OKTA	2.99%
Cash	3.80%

The outlier is of course NFLX, my last holdout of an investing life before Saul’s board. Sold a bunch of it this year, but this remaining bunch is in a taxable account so I’m waiting till next year as this year I owe way too many taxes already (thankful for having that problem, even in my first year of retirement). :grin: