🩺 Will Teladoc Rebuild From Here On?
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🩺 Teladoc: Goodwill Hunting?
Telemedicine provider Teladoc Inc. (TDOC) reported yet another quarterly loss. Shares are now down over 90% from their peak in February last year. While most investors have headed to the exit door, one remains defiant. So who is on the right side of things?
Teladoc was founded in 2002 in Texas by Byron Brooks and Michael Gorton. By the end of 2007, the company had 1M members with marquee clients such as AT&T that provided Teladoc services to employees as a health benefit.
After raising more than $45M in funding in the first half of the last decade, Teladoc acquired BetterHelp in January 2015 for $3.5M and Stat Health Services in June 2015 for $30M. Post the two acquisitions. It went public in July 2015 at $19 apiece.
Patients can consult remotely with over 3K licensed doctors at a time suitable to them for non-emergencies such as infections, flu, sinus problems, allergies, etc. It currently has a network of over 55K medical professionals with expertise in 450 subspecialties in over 40 languages.
The pandemic boosted platforms such as Teladoc as telemedicine took hold stronger than ever. Teladoc ended 2020 with 10.6M visits, almost 2.5x higher than the 4.1M visits in 2019. Many health insurers and employers also signed up for virtual-care services.
Teladoc's paid members in the US jumped to 51.8M in 2020 from 36.7M in 2019. However, as the world started opening up, growth plummeted, and the company ended 2021 with 53.6M paid members, adding ~2M members during the year.
With the fading of the pandemic boom, Teladoc had to find other growth avenues. As a result, the management viewed chronic care as the next growth area where the company could engage with members.
Enter Livongo, the digital health startup focused on people who made routine visits, like those with diabetes. It went public in 2019. In October 2020, Teladoc acquired Livongo for $18.5B. The cash-and-stock deal was meant to create a health technology giant as the demand for virtual care increased.
99% of Teladoc's shareholders approved the deal, and the acquisition was completed within three months.
The Cost Of Optimism?
Teladoc crossed the $2B revenue mark in 2021, 86% higher than in 2020. Covid-19 becoming an endemic heralded optimism in the company. Teladoc projected revenue of ~$2.6B for 2022, or a growth of 28%. The company also estimated supporting ~19M visits and ~55M members this year. All that said, the company wasn’t yet profitable.
The $18.5B Livongo was set to bring growth to Teladoc's stable. When Teladoc reported results last week, the company took a $6.6B impairment charge as it wrote down the acquisition value. This meant the company lost a record $6.7B in the quarter, compared to a $200M loss during the same period last year.
Revenue for the quarter rose 25% to $565.3M, below analyst expectations of $571.5M. The company reset expectations with revenue estimates of ~$2.45B. As it takes an impairment charge from the Livongo acquisition, Teladoc expects a loss of $7B this year.
The company is also witnessing an elongated sales cycle in the chronic care market as employers evaluate long-term strategies to deliver benefits and care to their employees. This uncertainty meant investors ran for the exit, and shares fell 40% in a single day, the biggest sell-off since the company went public in 2015.
In the middle of all this, one investor continues to have faith in the company’s prospects - superstar fund manager Cathie Wood. ARK Investment Management LLC is the largest shareholder in Teladoc, with a 12% stake. The company is the third-largest holding in the ARK Innovation ETF, which hit a two-year low last week.
As Teladoc shares tanked on Thursday, Wood scooped up 610K shares of the company through four of her funds. Wood said the company has become the "healthcare information backbone." Teladoc shares bounced back 10% after Thursday's nightmare, but investors remain on edge.
Is there more to the Livongo impairment saga, or is it all done? Will Wood turn sour as she did with Palantir? Will the company find its footing, or is it caught on the wrong foot? The questions are many. Answers will come sooner than later. Over to Q2.
TDOC ended at $38.32, up 3.18%.
Company Snapshot 📈
TDOC $38.32 +1.18 (3.18%)
Analyst Ratings (30 Analysts) BUY 32% HOLD 68% SELL 0%
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