What happened

Shares of Teladoc Health (NYSE:TDOC) were jumping 6.8% higher as of 11:18 a.m. EST on Thursday. The nice gain came after BTIG analyst David Larsen initiated coverage on the stock with a buy recommendation and a price target of $240.

So what

Analysts aren't always right with their recommendations about stocks. However, it's always wise to understand the factors behind their optimism or pessimism.

Man holding a smartphone showing a physician

Image source: Getty Images.

In this case, BTIG's Larsen is bullish about Teladoc's prospects for three key reasons. First, he points to a recent survey indicating that health plans put telemedicine as their top healthcare technology spending priority. Second, he believes Teladoc maintains a competitive advantage over its rivals. Third, Larsen thinks that the company will be able to achieve annual revenue growth of between 30% and 40%.

Is Larsen's optimistic view about the healthcare stock warranted? I think so. It's not surprising that telemedicine will be at or near the top of the list for health plans. It's also hard to argue that Teladoc's scope of services (especially with Livongo's digital health platform now under its umbrella) and global operations don't give the company a distinct competitive edge. Revenue growth of at least 30% seems very attainable.

Now what

Perhaps the most important thing to watch now with Teladoc is how its business will hold up when the pandemic fears decline. As more Americans receive COVID-19 vaccines, life could begin to return to normal. Teladoc thinks that the new normal, though, will include a much higher use of telehealth services. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.