Please ensure Javascript is enabled for purposes of website accessibility

Why Is Teladoc Health Stock Jumping Today?

By Keith Speights - Jan 25, 2021 at 11:20AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

There's no obvious catalyst, but here's what's likely happening.

What happened

Shares of Teladoc Health (TDOC 0.76%) were jumping 9.2% higher as of 11:04 a.m. EST on Monday. The telehealth services leader didn't make any announcements. There weren't any obvious catalysts behind the nice gain. So why is Teladoc taking off?

Perhaps the best guess is that we're simply seeing institutional investors pour money into Teladoc. When that happens, it creates upward buying pressure for a stock. 

Woman with laptop showing a doctor and pill bottles next to her laptop

Image source: Getty Images.

So what

Institutional investor buying is nearly always a good sign for a stock. The big money typically only flows into stocks that have strong growth prospects. And Teladoc certainly appears to be a healthcare stock with strong growth prospects.

Teladoc had a great story to tell at the annual J.P. Morgan Healthcare Conference a couple of weeks ago. The company continues to deliver robust revenue growth with a compound annual growth rate (CAGR) over the last five years of more than 70%. Institutional investors undoubtedly especially like that over 80% of Teladoc's revenue is recurring.

Even better, the telehealth leader has only begun to scratch the surface of its opportunity. In the U.S., there are 65 million members at current Teladoc clients who aren't members yet. That's nearly as many as the company's 73 million current members. And there are another 182 million Americans who don't work at current Teladoc clients.

Remember, too, that Teladoc isn't just focused solely on telehealth now. Thanks to its acquisition of Livongo last year, the company is a leader in digital health management. Livongo has around 500,000 enrollees. Teladoc estimates that there are roughly 18 million potential Livongo users at its current telehealth clients.

Now what

The challenge for Teladoc going forward will be to capitalize on its opportunity without skipping a beat. Its shares currently trade at 23 times sales. Stocks with such premium valuations tend to be volatile. However, Teladoc's valuation isn't as scary when you consider the potential market for telehealth and digital health management. The long-term prospects for the company continue to look very good.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Teladoc Health, Inc. Stock Quote
Teladoc Health, Inc.
$32.99 (0.76%) $0.25

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/24/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.