Remote medical care provider Teladoc (NYSE:TDOC) is far and away the leader in a field with real potential to help stem the ever-rising costs of U.S. healthcare. But turning that lead into a business that's in the black isn't so easy. That's why investors were fairly enthusiastic about its most recent quarterly report: It's still not profitable, but the numbers show a model with scalability and a clear path to profitability. Also key: Medicare Advantage plans will allow teleheath options starting in 2020, which opens a huge potential market.
In this segment of the Motley Fool Money podcast, host Chris Hill and Fool senior analysts Ron Gross, Matt Argersinger, and Jason Moser weigh in on Teladoc, its growth arc, its CVS (NYSE:CVS) partnership, and more -- as well as whether investors should be giving it a closer look, even after its recent share price pop.
A full transcript follows the video.
This video was recorded on Nov. 2, 2018.
Chris Hill: Shares of Teladoc up this week after third-quarter revenue came in higher than expected. They're still losing money, Jason, but Teladoc appears to be losing less money.
Jason Moser: They are, and they do have a clear path to profitability. That's one of those things we always like to see, with these unprofitable new IPOs. They've been in the market now for a few years. When you look at the business, its market, this is an attractive opportunity. It tackles perhaps the greatest challenge in healthcare, scaling it. It's very difficult to go through their release and the call and not be excited with what they're doing. U.S. paid memberships now stand at 22.6 million people. The visit-fee-only population is about 9.5 million.
There was another interesting point they made there. The Center for Medicare and Medicaid Services just published the rules which will allow Medicare Advantage plans to include telehealth as part of their bids in 2020. What that ultimately means is that Teladoc is going to be able to offer its full suite of services to those 21 million additional enrollees.
We talked about when they changed their name from Teladoc to Teladoc Health. It's really about this comprehensive, holistic solution. The partnership with CVS, that's not something that was just entered into lightly. There was a lot of research done with that from 2014 on. We're seeing that rolled out now in the Minute Clinics, these virtual Minute Clinics. And you'll see, as time goes on, CVS try to leverage that physical presence in those stores. It's going to be less about buying Pringles and more about actually focusing on good health, I think.
Probably easy to look at the share price today and anchor, feel like it's taken off and you missed the boat. I would encourage you to take another look. It's still a very reasonable price for a company that has a big opportunity ahead.
Hill: I'm going to overlook the shot you just took at Pringles.
Ron Gross: Yeah, what's wrong with Pringles? Salty goodness.
Moser: Well, it's less a Pringles thing -- what if we said Combos?
Matt Argersinger: Ooh, I like Combos!
Gross: Not the Pizza-flavored ones.
Hill: Really quick on Teladoc. This is a $5 billion company, and I don't think I could name one of their competitors. I'm sure they have them in this space. To what extent, if any, is management talking about acquisitions? They appear to be big enough now that, if they've got smaller competitors that they can snap up and incorporate, that might be a good move.
Moser: That's a good point you make. Most of the competition in the space is much smaller than they are. They've made a couple of big acquisitions to date so far. The most recent one was Advance Medical, and what that did was give them global exposure. They now have this global service called Global Care, where they can accommodate patients all over the world. Really, it makes a lot of sense, what they've been doing. They've been trying to gain as much market share early on as possible. Yes, that plays out on the financials in the short run, but long run, I think it's going to be the smartest decision.
Hill: Do you think they could go to Apple and ask to borrow some of that cash they have on the balance sheet?
Moser: [laughs] Hey, it's worth a shot.
Chris Hill has no position in any of the stocks mentioned. Jason Moser owns shares of Apple and Teladoc. Matthew Argersinger owns shares of Teladoc. Ron Gross owns shares of Apple. The Motley Fool owns shares of and recommends Apple. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool recommends CVS Health and Teladoc. The Motley Fool has a disclosure policy.