Telemedicine trailblazer Teladoc (TDOC -0.87%) has been losing money for a while now, so it was no surprise that it did so again last quarter. The size of the loss, however, was -- in the direction that investors prefer. Meanwhile, revenues beat analysts' expectations. In this segment of the Nov. 1 Motley Fool Money podcast, host Chris Hill and Motley Fool senior analyst Jason Moser talk about the massive market potential for this company, the advantages it has, why it's going to keep spending heavily on building its network, and whether it could prove irresistible as a buyout target.
To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. To get started investing, check out our quick-start guide to investing in stocks. A full transcript follows the video.
10 stocks we like better than Teladoc Health
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has quadrupled the market.*
David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Teladoc Health wasn't one of them! That's right -- they think these 10 stocks are even better buys.
*Stock Advisor returns as of June 1, 2019
This video was recorded on Nov. 1, 2019.
Chris Hill: Teladoc Health reported a loss in the third quarter, but it was a smaller loss than Wall Street was expecting. Overall sales came in higher. Shares of Teladoc moving higher as a result. Ron, you follow this company closely. Oh, no, wait!
Jason Moser: [laughs] Wait, wait!
Hill: Jason Moser, your thoughts on Teladoc?
Moser: Sure! I like what I'm seeing. To your point about the top line growth, they hit their top line guidance. They've raised full year guidance a little bit. Management clearly understands the need to develop this massive network with a comprehensive offering. To this point, it's the far and away leader in the space. Looking at the numbers, revenue, 24% growth of $138 million. Visits, 928,000, were up 45%. Utilization remains strong. The membership base is what's really impressive here. U.S. paid members now at 35 million, and visit-fee only at 19 million. Those are the biggest increases in the company's history. Most of that is because they have brought UnitedHealth Group's network into their network. You're seeing Teladoc partnering up with this virtual visits entity, which is a service provided by UnitedHealth. It reminds me of PayPal in the payments space. It's not like they're trying to completely shake things up, but they're partnering with the big players in the space to make it a better space. Ultimately, it seems to be working out. The expectations to be operating cash flow positive for the full year are intact. In fact, they're already there on a trailing 12-month basis. In regard to revenue growth, management is targeting 20% to 30% annualized growth for the next three to five years at least. They are making all of the right moves here. I think it's going to be difficult for other competitors to catch them. Ultimately, I feel like maybe Teladoc ends up getting acquired, though. I hope it doesn't.
Hill: Wasn't UnitedHealth working on their own version of a competitor in this space to Teladoc?
Moser: They've been working on their own. They've been partnering with other providers. And ultimately, they're bringing other providers into the network. No. 1, United is a tremendous network. You do have other companies in the space that are working in telemedicine. It's just, that's the best benefit to being a business that focuses on doing one thing right. Teladoc, that's how it began. That's how it's grown. And I think that's why it's succeeding so well today. It's because it's grown this big network, but more so, it's got a very comprehensive offering that is very difficult to match.
Hill: It's a $5 billion company. UnitedHealth, $240 billion. It seems like one of those situations, if the partnership goes well, UnitedHealth going to make them an offer.
Moser: It wouldn't surprise me, though you can understand my selfishness in wanting to see Teladoc go it alone, given the market opportunity that exists.