As we begin 2022, many companies are still being impacted by the effects of the pandemic. At the top of that list is Teladoc Health (TDOC -0.38%), the telehealth company that saw its usage and stock price surge during the height of the pandemic as patients needing medical care turned to its platform to see doctors virtually.
Considering this backdrop, investors could expect to see Teladoc's results tapering off, fitting the company neatly into the pandemic stock narrative. However, the actual results over the past few quarters tell a different story. So should investors buy, sell, or hold Teladoc in 2022? Let's take a look.
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Continued strong growth
In the third quarter of 2021, Teladoc reported year-over-year revenue growth of 81%, continuing a streak of sequential revenue growth since the beginning of 2019. On its own, the 81% revenue growth is excellent, but it's even more impressive considering that Q3 of 2020 featured growth of 108%. It's much easier to see a doctor now than it was in Q3 of 2020, so this growth suggests that Teladoc is an attractive option for patients even when in-person visits are a more viable option. While it's true that this 81% growth was a deceleration from the triple-digit growth seen in the previous four quarters, it's important to remember that in Q4 of 2019, revenue growth was only 24%. Although the pandemic may have pulled forward some growth, it's clear patients are sticking with the platform.
What's driving this revenue growth? In Q3, there were more than 3.9 million visits to the Teladoc platform, a 37% increase over Q3 of 2020, and an 11% increase sequentially. These telehealth visits bring in access fees, which are the majority of the company's revenues. Access fee revenue in Q3 increased 99% year over year, with U.S. access fees increasing 113%. These were both off of tough comps of 90% and 111% year-over-year growth in Q3 of 2020.
There's an important detail within the access fee data as well. Access fee revenue now comprises 87% of total revenue, up from 78% in the third quarter of 2020. This is higher-margin subscription revenue and helps explain why Teladoc's gross margins have improved over the past year. Additionally, management attributed the growth in access fee revenue as a percentage of total revenue to its Livongo acquisition, showing the benefits of that merger coming to fruition.
A move toward holistic telehealth
Teladoc is also seeing its clients stay with the platform and add more services over time. In the Q3 earnings call, management stated that repeat usage was up 25% year over year, and 70% of the year's bookings were multi-product sales, compared to 50% in the year prior. This plays into Teladoc's Primary360 product, which the company calls "a fully integrated solution of mental and physical health." During Q3, Teladoc signed agreements with CVS and Centene to expand this offering.
A gift from the market
The stock has taken a beating over the past year, in stark contrast to the business's results. Shares now sell for the same price as they did at the beginning of 2020. Turning to valuation, Teladoc is trading for only five times its forward sales, the lowest this multiple has been in two years. Telehealth is here to stay and is predicted to grow from its 2020 market size of $144 billion to $637 billion by 2028.
Considering its position as the preeminent name in this important and growing market, as well as its current valuation, Teladoc looks like a buy in 2022. Also, investors who already own shares could view the stock's sell-off as an opportune time to add to their position. For those who may still be on the fence, there's still time to watch the next few quarters' results before making a decision. Teladoc has room to grow and it should reward shareholders for decades to come.
