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Why Teladoc Will Continue to Win

By Brian Withers and Brian Stoffel – Updated Jun 23, 2021 at 7:21AM

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Even after the coronavirus is in our rearview mirror, Teladoc will still be with us.

Teladoc Health (TDOC -3.54%) has certainly been a beneficiary of social distancing and stay-at-home orders. But now that pandemic restrictions are relaxing, what will become of this popular virtual medical-healthcare platform? On this Motley Fool Live video recorded on May 12, 2021, Fool contributors Brian Stoffel and Brian Withers discuss the company's latest results and why this remote medical-care facilitator has built a strong moat to fend off competition.  

Brian Withers: Teladoc had a great quarter all around, it's projecting to have a great year. Their Q1 grew 151 percent, now it's Q1 to Q1 they were talking January through March. This is a year ago, was early pandemic before the lockdowns came. This is still pandemic growth that they're seeing. But you know what, they updated their full-year [revenue] guidance to around two billion dollars, which is an 80 percent year-over-year gain on the low end of its market [range].

Stellar growth all around, access fee revenue up 183 percent, visit fees up 24 percent, US 175 percent, international lagging behind at just 29 percent, US paid memberships to almost 52 billion up from 43. The Chronic Care enrollment, this is the former chronic care is formerly Livongo, that's up 66 percent. They're per month per member fees up to $2.24. That doesn't sound like a lot, but it's up from 87 cents 157 percent increase.

Gross margins are up. They're still not profitable on a GAAP basis with a $200 million loss, but with 732 million in cash or marketable securities and only burning about 65 million in cash from operations over the last 12 months, I think they've got plenty of runway. The stocks down 50 percent from its high for me, I think it's a great time to look at this first-mover in a massive growing market.

Brian Stoffel: This is a company, Brian, that I've actually avoided and part of the reason is because I have a tough time wrapping my head around what the real moat is here. Because I've had this theory that anyone with enough resources might be able to replicate what Teladoc is doing. Obviously, the last couple of years even have proven that maybe I'm missing something here, so educate me where do you see Teladoc's moat?

Brian Withers: Yeah. This is a network effect thing. Teladoc early on started calling themselves the nation's first and largest telehealth provider. It's made 12 acquisitions since 2013 to shore up its lead and a lot of those were competitors, which gets it into new markets, new health settings, new geographies, and potentially new customers and with its InTouch acquisition, it now can provide virtual services from the hospital all the way across all the different care settings to the home. Whether it's endocrinology, in an ambulance, post-acute, physician's office, a retail clinic at the worksite. They are in all of those places and the more places you are, that's reminds me the Shopify network, right? The more merchants they have, the more shoppers they attract, the more they can build their platform. This is the same thing that's going on with Teladoc is the more places there are, the more people say, well, they are in all these places I'm going to go get them. But I don't completely understand all of this, but to me, I just look at the year-over-year growth and 80 percent in a full year on top of last year's growth to me is amazing. It says that they are the clear leader in the market.

Brian Stoffel owns shares of Shopify. Brian Withers owns shares of Shopify and Teladoc Health. The Motley Fool owns shares of and recommends Shopify and Teladoc Health. The Motley Fool recommends the following options: long January 2023 $1,140 calls on Shopify and short January 2023 $1,160 calls on Shopify. The Motley Fool has a disclosure policy.

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