I’ve been watching Teladoc (TDOC), a “telehealth” company that lets users videoconference with MDs instead of seeing them in person. The company I work for is a customer, and I believe I have some coverage included in my health plan, but I’m ashamed to say I haven’t tried it out. Darn good health. (sarcasm)
Obviously this could be a game changing idea, but like so many others (renewable energy for instance), I’m not sure that there’s a great way to make money from it – Teladoc included. But let’s take a look.
One point in their favor: Teladoc is the clear leader:
Teladoc commands an impressive 75% market share in the telehealth industry.
The company has over 7,500 customers, including more than 220 of the Fortune 1000 companies.
Also, Teladoc estimates a total U.S. market opportunity for telehealth of more than $29 billion.
One point against: Teladoc’s share count has risen at an alarming rate, going from under 39M at the end of the March 2016 quarter to over 54M at the end of March 2017. This alone is enough to make me at least want to wait until things settle down. One reason the share count has grown is that they have been very acquisitive, and they just announced another one yesterday: they’re paying $440M in cash and stock for a company called Best Doctors. https://seekingalpha.com/article/4082756-teladoc-acquire-bes… They’re taking on $200M in convertible debt too.
Another point for: They’re growing like a weed, of course. Revenue is up 60% YoY or better the last several quarters. Organic revenue was up 41% in the March quarter. They also hit Total Membership of 20.1 million (up 34% YoY), and Total Visits of 384,839 (Up 60% YoY). That visit growth is extremely intriguing. Gross profit is over 70%…basically they have all the other elements of the land and expand companies I like.
Another point against: Unsurprisingly, they’re burning cash. Adjusted loss per share was 1.39 in 2016, and it’s supposed to be close to 90 cents again in 2017. Plus they’re also taking on debt with the acquisitions, as I mentioned.
I guess the overwhelming question I have is: How do you handicap the fact that a lot of the growth is from acquisitions? I mean, organic revenue growth was 41% – that’s good, but maybe still a “wait and see” kind of good, at least while the share count is rising close to 40% in a year. But visit growth was 60%. That’s absurd growth, and seems to suggest they’re integrating acquisitions well.
So far I’ve taken a “wait and see” approach. The shares jumped to over $32 in July 2015 – the month they IPO’d. Then nothing went well until May 2016 when they bottomed out under $10 (!) per share. I started watching them somewhere in the teens, and now they’re right back up to over $32, so my wait and see approach is looking pretty genius so far. (sarcasm)
Anyway, thought I’d throw it out there and see if I could get anyone else interested. Still waiting and seeing, but this is an interesting new business.