Shares of Livongo Health (NASDAQ:LVGO) jumped 6.4% higher on Monday, after KeyBanc analyst Donald Hooker raised his price target on the stock to $85 from $52. Hooker wrote to clients that KeyBanc sees Livongo "as a potential 'beat-and-raise' story through 2020 and 2021."
Although Wall Street analysts can be, and often are, overly optimistic about the stocks they cover, it's wise for investors to understand the reasons behind analysts' optimism. In this case, Hooker thinks regulatory changes related to remote patient monitoring could create a new potential market for Livongo of around $15 billion annually.
That optimism could be well-founded. Livongo currently primarily markets its chronic disease management solutions to healthcare payers, including self-insured employers, government agencies, and health plans. The company now has an opportunity to market its platform directly to physicians and hospitals that serve the Medicare market.
Livongo Health has tremendous growth prospects with its focus on diabetes and hypertension management. Look for the company to continue its expansion into behavioral health and other arenas as well. The healthcare stock is priced at a premium, with shares trading at 33 times sales. But Livongo's opportunities appear to justify its lofty valuation.