Virtual healthcare company Teladoc Health (TDOC -2.91%) will be the 2022 darling of Wall Street. Ok, don't laugh; the stock is down roughly 66% from its highs earlier this year. I don't blame you for being skeptical of this stock, which has been a complete loser over the past year.
But let's consider a few things. The company spent 2021 evolving, moving closer to its long-term vision of what healthcare could become. Throw in a COVID-19 virus that doesn't want to disappear, and we could have fireworks in 2022. Let's dive deeper:
Whole-person care is the new healthcare
The traditional healthcare system is very fragmented. Patients see an average of 19 doctors over their lifetime, and each new doctor often means a new practice, a new relationship with a care provider, and varying medical records.
Image Source: Getty Images.
All of this can make the care we receive an inconsistent experience, leaving patients unsatisfied and health ailments unresolved, potentially causing more harm. Teladoc has spent years acquiring and developing the assets to build Primary360, the front door to what it calls "whole-person care."
The concept of whole-person care brings primary healthcare, mental health, and treatment for chronic conditions together in a virtual package that patients can access from their phones. Teladoc has the technology to use data and analytics to create a more personalized healthcare experience due to its 2020 acquisition of Livongo for $18.5 billion in cash and stock.
A new reality?
Teladoc was one of those ideal "COVID stocks" as lockdowns and avoiding face-to-face visits for fear of getting sick drove a significant increase in telehealth usage. The company saw revenue growth accelerate from around 20% before COVID to triple digits during the pandemic.
TDOC Revenue (Quarterly YOY Growth) data by YCharts
Revenue growth has started to decelerate, in part because of the difficult year-over-year comparisons. Investors could be worried that a post-lockdown world will see the company's revenue growth slow to pre-pandemic levels, but is this likely?
Teladoc's Primary360 system could be the key to growth beyond the pandemic, but COVID seems to be helping the company in the near term. The omicron variant is the latest and most contagious mutation of the virus. Initial studies show that vaccinations are less effective against the omicron variant with efficacy against infection as low as 30%.
While we might not experience lockdowns to the extent that we did in 2020, we still might see continued adoption of virtual services to protect vulnerable people from exposure. This could drive the near-term telehealth business and speed up adoption of virtual healthcare systems like Primary360.
Years of growth ahead
Teladoc may benefit from these circumstances in 2022. Still, the long-term story is the permanent shift to Primary360 if patients decide that all-in-one virtual care is better than the traditional system. Teladoc fully launched its Primary360 platform just a couple of months ago and will market it through health plans, insurers, employers, and directly to consumers.
In November, management held an investor event and released multiyear revenue guidance of 25% to 30% growth per year through 2024. Going to market through all healthcare channels should allow the company to grow its user base -- and then sell multiple products to those users, further compounding revenue growth.
The company estimates that 80% of the population could benefit from one or more of Teladoc's services, which translates to a $261 billion potential market in the United States alone, meaning the company has penetrated less than 1% given its $2 billion revenue guidance for 2021.
Depressed valuation could mean big gains ahead
Investors have steadily sold off Teladoc stock since lockdowns peaked, probably on concerns that the company was a pandemic play -- and its success a momentary flash in the pan.
TDOC PS Ratio data by YCharts
No doubt, the shares could still go lower in the short term as growth stocks in general have had a tough time over the past couple of months. On the other hand, virtually all of the pandemic hype seems to be priced out of the shares now with the price-to-sales (P/S) ratio down from 24 to under 8, less than its pre-pandemic valuation.
If the company performs to the expectations it laid out recently, investors are looking at 25% to 30% annual returns over the next several years just from organic growth of the business. Primary360's potential success might also improve sentiment toward Teladoc, which could mean an increased valuation, further driving investor returns.
Teladoc's recent trajectory might understandably cause doubters, but I think the stock could also be one of 2022's biggest winners after being kicked to the curb in 2021.
