There has been a justifiably high volume of Zoom posts on this board, but amazingly barely anything on concept of telehealth and specifically Teledoc Health (TDOC; the industry leader). As many of you may know, Teledoc and Zoom have been among the top performing stocks YTD 2020.
As I and others posted in October, a new reality of health delivery was coming of age. As we are now seeing with full intensity, telehealth is becoming an essential and more cost effective part of routine medical delivery.
When I purchased TDOC at $60 on 10/2, I did so believing that its market-dominant position was at an early stage and would accrue disproportionate benefits to Teledoc over the long-term. Never did I think this would happen with the enormous intensity it has during the past 6 months with the stock trading now at $164. Obviously the COVID-19 pandemic has brought telemedicine into focus in a way never imagined in the short term, but I believe, as others in this thread have stated, that telemedicine is a new reality and that Teledoc is here to stay as the market leader for a very long time.
Given all of this, I thought the following bears repeating as I feel Teledoc REMAINS a very attractive investment opportunity even after nearly tripling since October. It’s market cap is still <$12B.
Per the Aug 2019 article, “HOW TELADOC IS TRANSFORMING ACCESS TO HEALTHCARE” (https://www.roboglobal.com/insights/how-teladoc-is-transform…)
Telemedicine, while at an early stage of adoption from a user and reach perspective, is not new.
Telemedicine both improves access to healthcare (as Saul’s son noted in his experience) AND reduces costs. “Telemedicine addresses two of the most critical unmet needs in our economy: access to care, and healthcare cost reduction.”
Teladoc is the market leader, and has built a wide moat of competitive barriers.
"Teladoc was first to market with telemedicine and…continues to maintain its market position by innovating and expanding into new markets, both domestically and internationally. Today the company has over 37 million members through its client base. The client base itself boasts marquis accounts such as Aetna, United Healthcare, and several of the Blue Cross Blue Shield plans, as well as 40% of the Fortune 500 companies, thousands of small employers, and over 300 hospitals and counting. They are also becoming a global market leader, with clients in over 130 countries driving 20% of Teladoc’s revenue."
"Although competition is intensifying, the industry has high barriers to entry. For example, there are extensive regulatory hurdles that need to be achieved in order to practice medicine remotely while securing the patients’ privacy. Additionally, in order to ensure an adequate supply of physician time, the company needs an extensive network. Teladoc has amassed a network of over 3,000 certified clinicians, similar to the way Uber has built its supply of drivers. Teladoc also uses a sophisticated predictive analytics system to ensure that the appropriate level of help is on hand and able to fill an appointment quickly, depending on the peak times and seasonal variability. It’s this level of service that helps Teladoc generate member satisfaction of 95%. Telemedicine companies also need a scalable platform that they can leverage to meet the growing needs of consumers. To put this in perspective, Teladoc invested over $100M over the course of a decade to build its platform to scale. This year the company expects to conduct four million virtual visits, up from one million just two years ago. It has additional capacity that would enable it to take on 10x its peak volume at any given time. It would be very difficult for another company to replicate this scale without a high degree of capital investment."
Put simply, Teledoc’s market position is not easy to establish, and it will be difficult for others to do what they have done.
Finally, “Teladoc is also cross-selling new products to its existing base. For example, it offers specialties such as behavioral health and dermatology. It also offers second opinion services for those who want to speak to another provider about a serious condition before undergoing surgery. The company has been actively selling these additional services to its existing client base and, as a result, is increasing its average revenue per client. Today, 40% of the base uses more than one product (up from 10% two years ago), and only 13% of the base uses 3 products, so there is a large runway for cross-selling. Finally, the company is growing internationally. Thus far, much of that growth has been inorganic, but as global demand for telemedicine increases, Teladoc is well positioned for that trend.”
Unfortunately I did not combine my TDOC investment with a position in Zoom, but I am considering it despite the significant recent run-up in Zoom. Both companies becoming growth monsters in a global environment where the rules of interaction are being redefined.
The market-beating returns of TDOC and TSLA has helped drive my YTD returns to +2% vs the double digit (-12 to -21%) negative returns in the various market indices. I am continuing to actively evaluate my portfolio below based on all of your valuable input. (That will not include selling TSLA in case you were wondering… :))
Fool on, and best wishes for health and happiness.
Long AYX, TTD, TSLA, TDOC, OKTA, DDOG, MDB, TLRA, MELI, LVGO,