Is it time to take the plunge and buy shares of Teladoc Health (TDOC 0.76%) this summer? The answer might not seem obvious if you look at the stock's recent performance. The telemedicine leader was a Wall Street favorite last year, its shares soaring by nearly 140% as people flocked to its virtual medical visits during the pandemic.
This year, though, investors are shifting their focus away from the companies that were tailor-made to meet the needs of 2020's crisis, and instead favoring companies that look poised to benefit in a post-pandemic world. Teladoc stock has slipped 29% year to date. So, is the best part of this stock's story over? Or does today's share price represent a buying opportunity?
Image source: Getty Images.
Not just a trend
The pandemic isn't over. But many people have returned to their old routines, going back to their workplaces and scheduling routine in-person medical appointments. However, this hasn't hurt Teladoc's business. It continues to see major growth. The company posted a 151% increase in first-quarter revenue. And total visits climbed 56% to 3.2 million. Based on this, it would be fair to say that the growing popularity of online medical visits isn't a trend that was solely powered by this health crisis.
In the company's Q1 earnings call, CFO Mala Murthy said, "I expect 2021 to be an investment year." Plans include product launches, expanding into new markets, and fully integrating the acquisition of Livongo, which Teladoc completed about seven months ago.
Livongo represents a big opportunity for revenue growth. The company brought to Teladoc expertise in the virtual management of chronic diseases such as hypertension and diabetes. Teladoc enrolled 62,000 chronic care members in the first quarter. That was a 66% increase from Livongo's enrollment during the same period a year ago. And the number of patients enrolled in more than one chronic care program tripled year over year.
Integration of the two companies is far from complete. In April, Teladoc made it possible for members to begin enrolling in Livongo programs directly from the Teladoc app. The company is aiming to create a seamless experience in other ways too. For instance, now doctors can directly refer their patients into Livongo programs through the Teladoc workflow system. Teladoc also expects growth as the company sells Livongo programs to hospital systems. The company says it's already signed "several deals" in this market.
Expanding primary care
In addition, Teladoc is working to expand its primary care offering. It recently signed agreements with several Fortune 1,000 companies. Those programs will launch nationwide by the first quarter of next year. They won't significantly contribute to revenue in 2021 -- but we should expect to see gains next year and farther down the road.
And that pretty much describes Teladoc's situation: The company is laying the foundations now for growth across its business in the years to come. Meanwhile, growth hasn't exactly screeched to a halt. The company says revenue may increase by as much as 85% this year to more than $2 billion, and total visits should be in the range of 12.5 million and 13.5 million. That would be up from 10.6 million visits in 2020.
Of course, Teladoc probably won't generate as much excitement this year as it did last year. That's because today's investments will take a while to bear fruit. And the shares probably won't replicate last year's performance, either. But that's OK. Teladoc will wow the crowd with the results of its efforts later.
In the meantime, what's an investor to do? Well, if part of your plan for the summer includes investing, you might want to put Teladoc on your watch list. It's now trading at about 11 times sales.
TDOC PS Ratio data by YCharts
That's close to the levels it was valued at in 2018 and 2019 -- before business truly took off. (Teladoc ended 2020 with a 98% increase in revenue. That's versus a 32% increase in revenue year over year in 2019.)
But only consider Teladoc if you're a long-term investor. This isn't a stock you'll want to sell as soon as the leaves change color. If you want to earn truly good returns from this dynamic healthcare stock, you'll need to hold on for a while. The efforts Teladoc is making now will offer plenty of share price catalysts in the years to come.
