As the market crashed into bear territory this spring, Livongo Health (NASDAQ:LVGO) was on its way to a record high. And that's where the stock stands at the moment, up 115% this year. After this kind of performance, can we expect more from Livongo? Let's have a look.

A woman uses a Livongo monitor while sitting at her desk at home.

Image source: Livongo.

Livongo uses technology to help its members monitor and manage their chronic conditions such as diabetes and hypertension. Using artificial intelligence, Livongo delivers personalized coaching to members to keep them healthy and out of the hospital. This proactive way of dealing with illness reduces healthcare costs. And for companies that sign up for Livongo for their employees, it boosts productivity. If employees stay healthy, they will spend more time on the job and less time out on sick leave.

Livongo isn't profitable yet, but it's on its way. The company, during the first-quarter earnings call this week, reiterated its goal of profitability in 2021 on an adjusted EBITDA basis. Can Livongo reach the goal? So far, things are looking positive.

Membership surges 100%

First-quarter revenue soared 115% to $68.8 million year over year, driven by a record 380 client launches, for a total of 1,252 overall clients. Clients are defined as companies that have at least one paid active contract with Livongo at the end of the quarter. As for members, that number is on the rise as well. Livongo for Diabetes membership surged 100% to 328,000 compared to the year-earlier period.

There's still plenty of opportunity to gain new members too. About 34.2 million Americans have diabetes, and 88 million American adults have prediabetes, according to the Centers for Disease Control and Prevention (CDC).

Livongo, optimistic about the rest of the year, increased its full-year 2020 revenue outlook. The company now expects revenue to grow between 70% and 78% to the range of $290 million to $303 million, up from expectations in the range of $280 million to $290 million. As for the second quarter, the company predicts revenue may grow as much as 9% from this quarter's level.

In more good news, the company has demonstrated that its services appeal to big players in the healthcare world. During the recent earnings call, Livongo spoke of two recent contracts. A deal with the Government Employee Health Association, which covers two million federal employees and their families, represents one of Livongo's biggest contracts ever. And Kaiser Permanente signed a five-year contract for Livongo's behavioral health program.

The unemployment risk

Since Livongo sells its services to employers and health systems, the near-term risk may be the unemployment situation. U.S. weekly unemployment claims reached record levels in recent weeks as the coronavirus outbreak drove companies to furlough workers, and in some cases, permanently cut jobs. If companies are trying to cut costs and reduce the number of employees, they may be less likely to sign up for Livongo's services.

That said, Livongo's higher guidance actually takes into account the above scenario. The company cited its predictable, recurring revenue model as well as the strong performance in the first quarter as reasons for the confidence during these uncertain times.

If impact from the unemployment situation is limited, the coronavirus outbreak may be an element that could boost Livongo's business now and in the future. Here's why: The coronavirus has been particularly devastating for individuals with pre-existing medical conditions. In a study of 178 adult coronavirus patients, about 89% of them had one or more underlying conditions, according to the CDC.

This factor may push companies and individuals to focus on wellness. Though Livongo's system won't cure illness, it can help the user to closely monitor his or her condition so they can live the healthiest life possible.

Livongo shares aren't cheap. But the company's growth story may have just started. The world's focus on wellness post-coronavirus and the large patient populations that can be helped by Livongo's services are two factors that are likely to drive client and member growth. That's why, for the long-term investor, Livongo makes a great healthcare stock to buy right now.