Teladoc Health (NYSE:TDOC) has been one of the biggest new properties in the healthcare space for the last several months now. With good reason, too; its advances in telemedicine have opened up huge potential opportunities for healthcare providers throughout the spectrum. As much as the company has gained in the past, it's set to do even better thanks to some new analyst coverage that's really only reinforced the most recent attitudes among investors.
Still a Buy
The most recent analyst joining the fray in Teladoc's favor is D.A. Davidson, who started its coverage up with a “buy” rating. Davidson called the company a “pure-play software company benefiting directly from Covid-19,” and also pointed out the company's incredible growth in recent days, noting that the “organic growth rate” is over 60%.
Davidson also put an impressive price target on Teladoc as well, calling it at $250. Considering the company is trading at $203.03 as of this writing, this price target represents a substantial upside.
Essentially, given the fact that Covid-19 will likely be at least a factor in healthcare operations for the foreseeable future, and that telemedicine will be a welcome addition to the toolbox, those who offer telemedicine services are likely to gain from this development. It's not just about Covid-19, either; telemedicine was already starting to catch on as a way to better connect rural dwellers with healthcare services, as well as provide healthcare operations with access to new markets.
The New Guy Isn't Alone
Perhaps more interesting here is that Davidson's new analysis represents part of the consensus, not a clearly contrarian view. Our own research puts Davidson's assessment right around the par-for-the-course range; its $250 price target matches exactly what Oppenheimer raised it to just two weeks ago, and almost matches Berenberg's $252 price target from September 2. It's a little higher than Deutsche Bank's $239 assessment from September 4, but certainly not out of line.
The gains in Teladoc's price target go back quite a way. SunTrust Banks, for example, hiked its price target from $144 to $200 back in May, and starting in July, Stephens started coverage on Teladoc with an “overweight” recommendation and a $250 price target. Citigroup and Argus started coverage just a day apart, and both called it a “buy” with price targets just $5 apart, with Citigroup calling it for $275 and Argus calling it at $280.
Looking at the most recent earnings report from July 29, we see a somewhat mixed bag, but still worth pointing out for the weight of positives. The earnings per share (EPS) numbers missed consensus somewhat, with Zacks projecting a loss of $0.23, while the actual loss came in at $0.34. Revenue, however, beat expectations at $241.03 million against an expected $220.49 million. In what may have been the biggest shock at the time, quarterly revenue was up 85% against the same quarter the preceding year.
A Catalyst, Not a New Development
Essentially, Teladoc was in the right place at the right time. It delivered an easy way for healthcare operations to add telemedicine options to their lineups, and that was welcome, if not particularly urgent.
The urgency stepped in right at the same time as Covid-19 did, and telemedicine went from a “nice-to-have” to a “we-need-this-to-stay-open”. Offering a package that made telemedicine as accessible as it was crucial was a welcome development, and with that in mind, it's small wonder that analysts all over the spectrum are expecting Teladoc to continue to post gains. Teladoc isn't breaking new ground—which commonly comes with a skepticism to overcome—so much as it is helping potential customers break the new ground they wanted to break anyway.
Teladoc isn't the only player in this market, of course; competitors like Amwell (NYSE:AMWL) who recently launched an IPO that did quite well, will chip away at Teladoc's market share, and there will likely be some smaller operations that try to use off-the-shelf software like Microsoft's (NASDAQ:MSFT) Skype or even Zoom (NASDAQ:ZM) to do the job. Still, Teladoc's all-in-one operation, supported heavily by a market already using the service and likely spreading good word-of-mouth—will likely be ahead of the game for some time to come
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