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Why Livongo Health Jumped 25% in June

By Jeremy Bowman - Jul 3, 2020 at 1:06PM

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The health tech stock's remarkable run continued.

What happened

Shares of Livongo Health (LVGO) were moving higher last month after the health tech stock got endorsements from several Wall Street analysts and as it reported research at a conference that demonstrated the value of its product, which helps diabetes patients manage their illness. According to data from S&P Global Market Intelligence, the stock finished June up 25%.

As you can see from the chart below, the bulk of the increase came in the middle of the month, during the conference.

LVGO Chart

LVGO data by YCharts

So what

Livongo kicked off June with a bullish note from Cowen as the research firm initiated coverage with an outperform rating. Analyst Richard Close commented on the company's strong execution and financial results.  

A message from Livongo on a smartwatch

Image source: Livongo.

The stock then surged nearly 20% from June 11 to June 18 as another analyst raised the price target on the stock and as the company reported new research at an American Diabetes Association virtual conference. One study showed that patients who used Livongo's platform "more regularly" achieved better glycemic control.

Commenting on the results, Livongo's chief medical officer, Bimal Shah, said, "As Livongo's AI+AI engine aggregates more data, our platform continues to improve by providing a more personalized care experience. We are able to leverage a combination of machine learning and clinical studies to continue to improve outcomes, drive down healthcare costs, improve utilization, and empower people to better manage their diabetes."

In the last week of June, Livongo got a pair of price target increases, with analysts saying that the stock had more room to run despite its monster gains so far this year.

Now what

Livongo shares have nearly tripled so far this year; the stock caught fire when the coronavirus pandemic hit, as the cloud-based provider of chronic disease management is insulated from the crisis, and its sales are doubling. Livongo even raised its full-year revenue guidance in its first-quarter report from $280 million-$290 million to $290 million-$303 million. On a price-to-sales basis, the stock trades at a valuation of about 24 based on that forecast, but in today's environment that's actually lower than a number of other cloud stocks, many of which are growing more slowly. As several analysts said last month, the stock could keep moving higher from here, as it's chasing a $16 billion market opportunity.

Jeremy Bowman owns shares of Livongo Health Inc. The Motley Fool owns shares of and recommends Livongo Health Inc. The Motley Fool has a disclosure policy.

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