Teladoc Health (TDOC 0.78%) can be somewhat polarizing. The company has emerged as the leader in virtual care. However, Teladoc has been a huge disappointment for investors this year with its shares sinking more than 50% from the highs set in the first quarter.
Is Teladoc likely to rebound or continue to languish? Here's the bullish case and the bearish case for the healthcare stock.
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Bull case: Virtual care is just getting started
Keith Speights: My bullish opinion on Teladoc Health rests on two assumptions. First, the virtual care market is just getting started and has massive growth prospects. Second, Teladoc is in the best position to succeed in this market over the long term.
Global consulting firm McKinsey & Company estimates that the U.S. virtual care market could reach $250 billion. Granted, hitting this level won't be a slam-dunk. However, the firm thinks that telehealth will continue to enjoy increased adoption. I agree. And I look for the international market to present big opportunities as well.
But is Teladoc really in the strongest position to be the biggest long-term winner? I think so. The company's customer base already includes more than half of the Fortune 500 plus many smaller clients. Teladoc provides the widest offering of products and services in the industry.
Some might point to Teladoc's slowing growth. However, that's to be expected after the company's business skyrocketed in 2020 thanks to the pandemic. Importantly, all of Teladoc's key underlying business metrics continue to increase robustly. I'm convinced that the stock has plenty of room to run.
Bear case: You can't keep your doctor on Teladoc
Taylor Carmichael: I used to be a Teladoc bull, and I still think there is significant upside to this stock. On the other hand, I've never bought shares. When I was discussing Teladoc stock with my father, he asked me a question that kind of stopped me in my tracks: "Can I keep my doctor on Teladoc?"
If you remember the fight over Obamacare, that was a big question people had. In medicine, trust is important. Your doctor is the one who will be suggesting what medications you take, and what surgeries you need. Most of healthcare flows from your relationship with your primary care physician.
Teladoc is bringing the internet revolution to healthcare. I'm a big fan of the internet revolution. It makes services faster, cheaper, better. With Teladoc you can speak with a doctor within minutes. That's an important and very welcome innovation in healthcare.
On the other hand, with Teladoc you get whatever doctor is next in the queue. There is no relationship with a doctor. So my father lost all interest in Teladoc stock. And his question diminished my enthusiasm as well. I can see why health insurance companies would love Teladoc. It's cheaper! But that doesn't mean ordinary people will love a service where they have no doctor-patient relationship, no primary care physician that you see over and over.
In my mind, Doximity (DOCS +0.00%) is a stronger value proposition in the telehealth space. Using Doximity's platform, people can have a telehealth visit with their regular doctor. So for people who want to keep their doctor, Doximity is the way to go. And it's this real-world concern that is keeping me out of Teladoc stock.
Addressing the divide
Many investors will probably agree that the points made by both the bull and bear cases for Teladoc are valid ones. Is there a way to address the divide between the two views? Teladoc just might have the answer.
The company recently launched Primary360. It's a virtual primary care solution. Primary360 allows clients to pick their healthcare provider and see the same person online with each visit. But the service still offers access to other doctors after-hours and on weekends.
Granted, Primary360 doesn't fully address the objection that Taylor raised about keeping your doctor if you already have a primary care physician that you really like. But for many people, Teladoc's new product will be a good fit. It won't be surprising if Primary360 helps Teladoc make solid inroads with that huge virtual care market that McKinsey projects.
