Healthcare consumers are experiencing a crisis. Over the past years, America has transformed into a country with the most expensive costs of care in the world with the American Medical Association reporting that the average spending of one person reaches $11,000 annually.
While this situation obviously burdens the consumers, looking at it from an investment perspective reveals just how much health insurers could stand to profit from it.
For instance, Anthem (ANTM) stock actually rose over 100% in the past three years, thanks to moderate revenue gains and huge bottom line profits. As enticing as that sounds, there are still healthcare companies out there aiming to keep the costs reasonable and the service convenient. One of them is Teladoc Health (TDOC).
Teladoc is a telehealth company that offers health services and medical advice to patients over the phone or via video conference calls. Although this is by no means a replacement of the traditional visits with your healthcare providers, the technology expands the reach of specialists especially when it comes to consultation services. It also provides a convenient platform for patients who will no longer need to actually make a trip to their doctors.
Most importantly, telehealth allows care providers to offer their services at lower prices. So far, spending on telehealth services is estimated to reach roughly $30 billion -- a staggering decrease from the multi-trillion-dollar amount Americans spend on healthcare services every year.
In the next five years or so though, the spending on telehealth services is anticipated to increase by approximately 20%. This could bring spending on this industry to a whopping $100 billion annually. Here is where Teladoc’s competitive advantage comes in.
At the moment, Teladoc is one of a handful of providers that actually has a global presence. The company is available in 130 countries and accessible in 30 languages. With such a broad market, Teladoc revenues showed an 89% increase year over year in 2017 and 79% in 2018. Meanwhile, the first half of 2019 saw the company’s profits hit a 40% increase year over year, with total patient visits rising 73% to reach 1.97 million.
Teladoc has also invested in promising acquisitions. Its $440 million merger with competitor Best Doctors back in 2017 has proved to be a great way to expand quickly and cover more ground.
For the third quarter of 2019, Teladoc once again delivered good results. The company’s revenues increased by 24% to reach $138 million, which surpassed Wall Street’s estimate of $136.5 million. Paid memberships in the United States grew by 55%, which now puts the total at 35 million members.
For its fourth-quarter earnings report, the company is expected to keep the momentum and rake in roughly $149 million to $153 million in profits, with a 2019 full-year revenue to be somewhere between $546 million and $550 million.
Despite the promising performance of Teladoc so far, there are still risks to consider before buying the stock. One of the major concerns is competition. Although Teladoc retains the title of being the leader in the telehealth services industry today, competitors American Well, Grand Rounds, and MDLive are gaining traction as well. Nonetheless, name recognition alone sets Teladoc apart from its rivals. However, the entrance of Amazon via its Amazon Care initiative in September is considered a major threat to the company.
All in all, Teladoc stock remains attractive. As with practically everything in investing, the key is to exercise due diligence and diversifying your portfolio. Teladoc is not a perfect company, but its sheer presence is already disrupting the healthcare industry. This makes the stock a good addition to a diversified portfolio, and the fact that you could be one of the pioneering investors makes it all the more exciting to own.
BUY (TDOC) on the next dip.
