Telehealth provider Teladoc Health (TDOC 0.30%) has experienced revolutionary changes to its business due to the COVID-19 pandemic. Before the spread of the virus, only 11% of Americans had sought online care from a physician. In just a matter of months, that metric has shot up to 76% -- and the ease of receiving medical care from the comfort of home is unlikely to be forgotten even when the pandemic ends.
The upsurge in sales isn't the only positive development. Last month, Teladoc completed its multibillion-dollar acquisition of Livongo Health, a premier digital diabetes management company. This serves as a significant catalyst for Teladoc, and one that should propel its stock to new all-time highs. Let's find out why the stock is a solid buy right now.
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Amazing results from Teladoc
During the third quarter of 2020, Teladoc's revenue was up by a whopping 109% year over year at $288.8 million. There are more than 51.5 million paid members of Teladoc's platform, up 47% from Q3 2019. Patients notched a total of 2.8 million visits on Teladoc throughout the quarter, a threefold increase from the same period last year.
Given these astounding results, it should be no surprise that Teladoc has enriched its investors. In fact, the stock is up 132% over last year. For the full year, Teladoc expects to bring in more than $1 billion in revenue and roughly $100 million in net losses, compared with $533.3 million in revenue and a $98.9 million net loss in 2019.
Amazing results from Livongo
Since Teladoc and Livongo are now one, it's necessary to examine the latter's financial position if you're considering buying shares of Teladoc. Like Teladoc, the diabetes management company is also exponentially growing its business. During Q3 2020, the number of members using the namesake Livongo App more than doubled year over year to 442,000.
Unsurprisingly, revenue was up as well, rising by a staggering 126% over last year to $106.1 million. Unlike Teladoc, Livongo was a profitable solo business, with $19.2 million in net income during its third quarter. And there are plenty of synergies ahead that should allow both companies to come together as more than just the sum of their parts.
Better together
Together, Teladoc and Livongo will expand into general medicine, behavioral health, expert medicine, hospital care, diabetes, and care for patients with hypertension. Prospective patients who sign up for online consultation with Teladoc could now receive a referral to the Livongo App and vice versa, lowering costs and boosting profits on both sides.
Teladoc and Livongo are undoubtedly the best players in the telemedicine sector. Both companies boast a customer retention rate over 90% and deliver significant value to patients. For example, patients who use Teladoc save on average $472 per virtual visit compared to traditional consultations, whereas patients utilizing the Livongo App save about $88 per month in medical expenses.
Unlike its competitor Amwell (AMWL 0.78%), Teladoc will cover a much more wider patient market with its new move into chronic disease management. By 2023, Teladoc and Livongo expect to generate more than $3 billion in sales and close to $600 million in operating income less non-cash expenses (EBITDA).
So what's the verdict?
Right now, Teladoc stock is trading at 17 times revenue, which isn't all that expensive for a company that's doubled its sales from the past year.
In terms of its valuation going forward, the stock's price-to-sales multiple drops to 8.2 once we factor in its 2023 growth projections. Keep in mind, Teladoc and Livongo are the leaders in a $121 billion total addressable market for telehealth -- and that's only for the U.S. Given the scalable nature of their businesses, the two entities can take it one step further by expanding their operations internationally. Teladoc has already done so, with a presence in over 175 countries.
For healthcare investors looking for growth stocks at a reasonable price, Teladoc is arguably the best choice right now.
