3 reasons to buy Teladoc shares and 1 reason to sell
Although its shares have lost more than 67% of their value in the past 12 months, there are at least a few reasons to still be interested in buying Teladoc Health ( DOC -3.45% ) Stock. The telehealth company’s continued investment in its platform continues to pay off, and it’s certainly one of the leaders in a rapidly evolving space.
But, it’s understandable that investors are intimidated by its recent abysmal performance. Let’s think about three reasons why there is still a bullish case for Teladoc, then conclude by also discussing a big reason to consider selling.
1. Revenue per member is growing rapidly
The first reason why Teladoc might be worth buying is that it generates more revenue per subscriber than ever before.
Last year, each member in the United States brought in an average of $2.49 in revenue, a 52% increase over the 2020 average. This was made possible by members increasing their use of company telehealth services; its total number of visits increased by 38% year-on-year, reaching 15.3 million at the end of 2021.
New programs like its primary care service Primary360 are crucial when it comes to enticing existing subscribers to initiate more telehealth visits. Primary360 is designed as an alternative to the in-person primary care experience, and members who sign up for it are 50% more likely to use another Teladoc service – usually following a referral from an affiliated practitioner, of cours.
Going forward, expect Primary360 to continue to be a major driver of increased revenue per member as the company supports more specialties and integrated care programs.
2. It forecasts good growth until at least 2024
Over the next few years, Teladoc likely won’t impress investors the way it did with its surge in 2020 and 2021, but it still plans to generate faster-than-average growth, and that’s another why his actions might be worth picking. at the top.
Management expects the subscriber base to grow slightly by up to 5% per year. But with continued efforts to extract more money from each person using the service, it also expects to be able to grow revenue at a compound annual rate (CAGR) of at least 25% per year through 2024. would leave it with more than $4 billion in admissions in 2024, compared to total revenue of just over $2 billion in 2021.
For reference, Teladoc’s quarterly revenue has grown 331% over the past three years, so these projections are reasonable and actually signify a reasonable deceleration in growth to what may be a more sustainable rate than the takeoff of the past. recent.
3. Many consumers enjoy using telehealth
In terms of industry-wide tailwinds, Teladoc is benefiting immensely from the trend of consumers appreciating some of the benefits offered by telehealth over traditional in-person healthcare visits.
According to research commissioned by the company, 82% of people think telehealth is at least as good as in-person care options. And 60% of consumers are at least open to the possibility of a virtual healthcare plan, which means Teladoc’s total addressable market is absolutely gargantuan.
Additionally, both of these pieces of information bode well for the company’s attempts to expand its offerings into medical specialties and chronic care management. Additionally, as Teladoc finds new ways to integrate medical sensors into its telehealth services, its pitch to consumers will be more compelling.
But can it become profitable?
Despite these reasons to buy Teladoc shares, there is also a reason to sell them.
It’s not profitable and it’s clearly not making sustained progress towards profitability over time. Its gross margin under generally accepted accounting principles (GAAP) was 67.2% in 2021, compared to 63.1% in 2020 – but 2020 has been a particularly difficult year, so the recovery is not necessarily part of a larger positive trend.
Still, there is evidence that things are looking up. Its total quarterly expenses have declined as a percentage of revenue over the past three years. And its quarterly free cash flow has grown 52.3% over the past year, so the profitability picture is far from dire.
But for investors who are more interested in stability than growth potential, a lack of short-term profitability could be a deal breaker. For growth-oriented investors, it’s understandable that this stock might be worth considering now.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end consulting service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.