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Why Teladoc and Livongo Were Climbing Today

By Jeremy Bowman – Oct 13, 2020 at 3:54PM

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Shares of the health tech companies rose as the combined company announced its first sale.

What happened

Shares of Teladoc Health (TDOC 1.07%) and Livongo Health (LVGO) were moving higher today after the soon-to-merge company made its first sale, notching a deal with Guidewell Health.

As of 2:48 p.m. EDT, Teladoc shares were up 5.6%, while Livongo had gained 5.1%.

A mother and child having a telehealth visit with a doctor

Image source: Teladoc.

So what

Guidewell Health, a mutual insurance company and longtime customer of Teladoc, said it would offer Livongo's diabetes monitoring services to 50,000 Florida Blue members with no co-pay. Teladoc-Livongo management revealed the news at the HLTH virtual conference on Monday. 

The deal was significant as it's the first sale the company has made as a combined entity, and it shows the cross-selling potential from the two health tech platforms. Investors had pooh-poohed the Teladoc-Livongo merger when it was announced, believing that Teladoc, a telehealth provider, was overpaying for Livongo, whose technology helps patients manage and monitor chronic diseases. Some Livongo investors were also disappointed that its growth story was coming to an end, as it had been one of the best-performing stocks on the market this year. 

The Guidewell Health announcement seemed to boost investor confidence in the merger and show the kind of synergies that the combined company can deliver. Executives hinted that there were more such deals brewing as Livongo founder Glen Tullman said, ""There's a lot of takers. There's a lot of interest. This happens to be the biggest, most prestigious one we've announced so far." 

Now what

With today's gains, Livongo actually pulled ahead of its closing price on Aug. 4, the day before the merger was announced, while Teladoc shares are still down 6% since then. Still, today's news shows both that the combined entity may be stronger than the two companies operating alone and that investors will respond favorably to customer expansions, boding well for future stock growth. The deal is expected to close later this quarter.

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

Stocks Mentioned

Teladoc Health Stock Quote
Teladoc Health
$27.38 (1.07%) $0.29
Livongo Health Inc Stock Quote
Livongo Health Inc

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