Credit Suisse analyst Jailendra Singh upgraded his rating on Teladoc's stock from neutral to outperform and boosted his price forecast from $225 to $249. Singh's new target price represents potential gains of roughly 25% for investors, based on Teladoc's current price near $200.
Teladoc's share price has declined by approximately 20% since it announced its plans to merge with Livongo Health on Aug. 5. Some investors questioned whether the $18.5 billion Teladoc agreed to pay for Livongo in cash and stock was too steep a price. Others wondered whether the two companies' operations were as complementary as management believed.
Singh, however, argues that merging the two businesses is a sound strategy, as it will create a "digital health giant" with leading positions in virtual care and chronic care management.
There will no doubt be some synergies between Teladoc's virtual care network and Livongo's platform, which helps people monitor chronic conditions like diabetes. Moreover, the combined company will have an attractive financial and growth profile, with expected 2020 full-year revenue of approximately $1.3 billion -- signifying year-over-year growth of 85% -- and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of more than $120 million.
Better still, a combined Teladoc and Livongo could help to reduce the need for in-person medical care at a time when many health centers are stretched thin due to COVID-19.