- Winter is coming -- and an especially rough one should boost Teladoc's telehealth visits.
- The combined U.S. market for Teladoc with Livongo stands at $121 billion.
- Teladoc is currently on scratching the surface of its international opportunity.
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It's now a done deal. Teladoc Health (TDOC -0.87%) completed its merger with Livongo Health last week. The combination of the two companies, first announced on Aug. 5, 2020, wrapped up in less than three months.
Many investors haven't been happy about the merger of Teladoc and Livongo. I'm not one of them. My view is that the combination has created the strongest virtual care provider on the market. I also think Teladoc remains a great stock to buy now that the Livongo deal has closed. Here are three compelling reasons why.
1. A rough coronavirus winter could be on the way
COVID-19 cases continue to climb across most of the U.S. Experts have warned that a rough coronavirus winter could be on the way, particularly with the additional threat from the flu season.
We've already seen earlier this year that the pandemic served as a catalyst for Teladoc, fueling a huge jump in telehealth visits. Livongo also experienced a strong boost due to the coronavirus concerns. It's likely that a worsening situation this winter would benefit Teladoc further.
Granted, the company is already anticipating a strong fourth quarter. Teladoc CFO Mala Murphy stated in the Q3 conference call that the company has factored another COVID-19 wave into its guidance. However, Teladoc is widely seen as a coronavirus hedge. If COVID-19 cases soar, so will this healthcare stock.
2. The massive long-term U.S. opportunity
Sooner or later, the pandemic will end. Teladoc is well-positioned for long-term growth in the U.S., though, regardless of how long the coronavirus crisis lingers.
Livongo brings a new addressable U.S. market of around $47 billion to the table for Teladoc. This figure includes only the opportunity for Livongo's digital health platform in helping individuals manage diabetes and hypertension. Other chronic conditions aren't factored into the total. Teladoc believes that its addressable U.S. market is close to $74 billion. With Livongo now under its wing, Teladoc's total U.S. opportunity is around $121 billion.
No, Teladoc isn't likely to capture all of this potential market. However, it doesn't have to for the company to have tremendous growth prospects. Also, the addition of Livongo puts Teladoc in a stronger competitive position than its rivals, in my view. Even before the merger completed, it was already helping Teladoc and Livongo with cross-selling. Teladoc is already working on new virtual solutions for payers that incorporate both telehealth and virtual chronic disease management.
3. A largely untapped global market
Teladoc's estimated addressable market of $121 billion doesn't include any of its opportunities outside the U.S. And those opportunities are significant. There's a largely untapped global market for telehealth and digital health management.
The company is making progress in reaching international markets, though. Teladoc recently partnered with Telefonica, one of the biggest telecommunications providers in Europe and Latin America. Telefonica plans to offer Teladoc's virtual care products to individuals and employers in Spain. The company hopes this will set the stage for expanding with similar programs in other parts of the world.
While Teladoc has a presence in more than 175 countries, Livongo has focused only on the U.S. market so far. Teladoc should be able to leverage its international operations to expand the reach for Livongo's digital health platform.