Please ensure Javascript is enabled for purposes of website accessibility

A Big Quarter From BetterHelp Is Just What Teladoc Needed

By Cory Renauer - Updated May 14, 2021 at 11:58AM

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

Outstanding performance from Teladoc Health's mental health services offset worries about decelerating chronic care enrollment.

Teladoc Health's (TDOC 4.88%) first-quarter earnings report left investors with mixed emotions last week. The company's new chronic care segment added a lot of new members during the first three months of 2021, but significantly less than a year ago.

While the Livongo acquisition that closed last October isn't proceeding as well as investors hoped, the stock didn't collapse. That's because a much older investment in mental health services is blowing past previous expectations.

Happy doctor on a telehealth call.

Image source: Getty Images.

Growing pains?

Last fall, Teladoc Health made a huge bet on Livongo and its suite of services that help patients manage diabetes, hypertension, and other chronic conditions. During the first quarter of 2020, Livongo added 105,000 thousand members to its flagship diabetes management program.

In the first quarter of 2021, Teladoc Health's entire chronic care operation added just 72,000 members. This was a lot less than analysts were expecting, but combining operations created by different organizations is never easy. 

BetterHelp to the rescue

It's been more than six years since Teladoc Health acquired BetterHelp and it's growing faster than ever. In 2020, Teladoc reported a 500% increase in mental health visits through its business-to-business channel.

During Teladoc's first-quarter earnings call, CEO Jason Gorevic said the company's mental health services are on track to more than double last year's performance. Strong performance by Teladoc's BetterHelp segment allowed the company to report revenue and earnings that beat Wall Street analyst estimates.

Overall, Teladoc performed extremely well in the first quarter. Total revenue jumped 151% higher and on the bottom line, adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) surged to $57 million from just $11 million in the previous year period. 

Looking ahead

The stock market was able to look past what appears to be poor execution of the merger with Livongo because its mental health service is crushing it right now. Since chronic care management is a crucial part of Teladoc's long-term strategy, the honeymoon won't last long.

Teladoc shares are still trading at around 99 times the company's adjusted EBITDA estimate for 2021. With expectations so high another weak quarter from the chronic care department could flatten the stock. 

That's because Teladoc Health isn't the only major player in the telehealth space, and any loss of market share over the next few years will be extremely difficult to recover. In April, Cigna (CI 1.71%) acquired MDLive, one of the largest privately held telehealth service providers in the U.S. Recently, Amazon (AMZN 3.15%) expanded its Amazon Care service to U.S. employers and more than half a million of its own employees.

Stay patient

America's healthcare system was raised to tackle acute issues while demand for chronic care services grew unchecked for decades. In 2018, the Centers for Disease Control (CDC) found a slight majority of U.S. adults have at least one chronic condition. While there are other players in the telehealth space, Teladoc Health is still the company best positioned to fill this unmet need.

The first full quarter following the acquisition of Livongo has been disappointing on the chronic care front, but it's still too early to call the ambitious merger a failure. After all, the company credits the extension of Livongo's digital capabilities to BetterHelp's therapists for some of the mental health operation's recent success.

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.
TDOC
$34.83 (4.88%) $1.62
Amazon.com, Inc. Stock Quote
Amazon.com, Inc.
AMZN
$109.56 (3.15%) $3.35
Cigna Corporation Stock Quote
Cigna Corporation
CI
$268.03 (1.71%) $4.51

*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 analyst team.

Stock Advisor Returns
316%
 
S&P 500 Returns
112%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/04/2022.

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.