Sandy Draper, an analyst from SunTrust has raised his bank's price target on shares of Teladoc Health (TDOC 0.26%) in response to increased utilization influenced by stay-at-home orders. Draper raised Suntrust's price target on shares of the telehealth pioneer to an even $200 from the previous target of $144 set in April. 

A 10% gain ahead?

At recent prices, SunTrust's new price target suggests a 10% gain once the market comes to the same conclusions as Draper. Teladoc's stock soared past $195 this morning but the price settled to $185 by the afternoon.

Teladoc's top line is headed in the right direction at a fast enough pace. In the first quarter, Teladoc delivered 2 million medical visits which pushed total revenue 29% higher year over year to $137 million.

A doctor on video chat

Image Source: Getty Images

In 2020, the company expects total revenue to reach between $800 million and $825 million which means the stock's currently trading at around 16.8 times sales. This is a really high multiple, but it's not that farfetched when you consider how much room Teladoc still has to grow.

Here comes the competition

Stay at home orders have inspired increased utilization of Teladoc's services, but it looks like the company's already cutting prices to boost subscriptions. Paid U.S. membership rose 61% year over year to 43 million but subscription access fee revenue rose just 33% over the same period. 

Unfortunately for Teladoc, the COVID-19 pandemic has unleashed a deluge of cash on digital health start-ups that could become tomorrow's competition. The market seems willing to overlook Teladoc's bottom line wallowing in negative territory for now, but further signs of a pricing war with similar businesses could cause investors to lose their patience.