It's been a record year in the world of telemedicine -- and no company dominates the U.S. corner of this market more than Teladoc (TDOC 0.69%). The company is the oldest telehealth provider in the country. With the demand for telehealth services higher than ever because of the coronavirus pandemic, it's no surprise that Teladoc's star power has exploded since the beginning of the year.
In the second quarter -- which ended June 30 and encompassed the peak of the pandemic -- management said that patient visits were up 203% compared to the second quarter of last year. In an April survey, global management consultants McKinsey & Company found that 46% of consumers turned to telehealth consultations when an in-person visit with their medical provider was canceled, a 35% uptick from last year.
Investors watching Teladoc's rapid growth (the stock is up 151% from its Jan. 2 closing price) might be worried that demand will peak and the stock will fizzle out. But Wall Street analysts don't seem concerned. In fact, they project that Teladoc will achieve 20% earnings growth every year for the next five years.
Here's why Teladoc's an investment you won't want to miss out on.
The company's balance sheet is rock-solid
On March 13, at the very beginning of the pandemic, Teladoc reported that it had seen a 50% increase in patient visit volume in the previous week alone. With patients canceling routine appointments and elective procedures left and right because of health concerns during lockdown, it's not surprising that Teladoc reaped the benefits of consumer demand for cutting-edge telemedicine solutions.
In the first quarter of 2020, which ended March 31, Teladoc's revenue grew by 41% on a year-over-year basis. During the first three months of the year, the company saw a 92% increase in patient visits on its platform. It reported an excellent gross margin of 60% in the quarter. Teladoc's total earnings for the second quarter of this year came to $241 million, an 85% increase from Q2 2019. Its revenues for the entire first half of the year were $422 million.
Two key acquisitions could make Teladoc investors rich
On July 1, Teladoc announced that it had concluded its acquisition of private company InTouch Health, a move that should expand its existing telehealth platform to capture a wider range of consumers across more diverse fields of medicine. In Teladoc's press release announcing the finalization of the purchase, it stated:
With the integration of InTouch Health's innovative telehealth capabilities linking providers to one another in complex medical environments, Teladoc Health will connect the care experience across in-patient, outpatient and home care settings, ensuring greater access to high quality care and better health outcomes...the company is now the only global end-to-end partner spanning the full spectrum from acute visits and chronic conditions management to complex specialty care and remote surgery.
Teladoc's other acquisition -- and the one that has been most prominent on investors' radar -- is its merger with fellow digital-medicine leader Livongo Health (LVGO), which it announced Aug. 5. Teladoc will emerge the dominant figure from the merger; its current investors will comprise roughly a 58% stake in the new company, while individuals who hold Livongo stock before the merger closes will make up the remaining 42%.
Not only will the Teladoc-Livongo merger create a virtual health giant of unprecedented proportions, widely expanding the platform's consumer reach, but Livongo's expertise in digital health management for chronic conditions will considerably augment the combined company's services and capabilities. Shareholders will also reap the benefits of this merger. Livongo has been hugely profitable this year, reporting a 125% year-over-year revenue increase in Q2. The acquisition, which is slated to conclude by the close of the fourth quarter, is anticipated to bring about pro forma revenue growth of 85% for the new company in 2020.
In the age of digital healthcare, Teladoc is the clear winner
An April study released by Global Market Insights reported that the telemedicine market, worth $45 billion as of 2019, is expected to hit a compound annual growth rate (CAGR) of more than 19% between this year and 2026.
It's been estimated that Teladoc's market share of the U.S. telemedicine industry is approximately 75%. The upcoming acquisition of Livongo will only broaden Teladoc's footprint in this exploding market. The strength of Teladoc's balance sheet, as well as the diversity of and demand for its services -- which are only poised for further growth in a post-COVID-19 world -- make this growth stock a bankable investment in 2020 and beyond.