Why Teladoc (TDOC) Stock Has More Than Doubled In A Year

Despite posting loss since its IPO in June 2015, the stock price of Teladoc, Inc. (NYSE:TDOC) , a telehealth service provider, has only moved up.

Stock price, which is often largely influenced by earnings, is not replicated in case of Teladoc. In fact, the stock has surged 119% in a year’s time, significantly outshining the industry’s growth of 6.9%.

What’s Supporting the Rally?

Investors note that the company is in the inception phase and losses are a result of heavy expenditures incurred on marketing and substantial investments made to acquire new clients, build its proprietary network of healthcare providers and develop its technology platform.

All the more encouraging is that these investments are bearing fruit, which is reflected by a strong increase in membership, visits and client base. These drives have led to an upsurge in revenues at the company that has witnessed a CAGR of 74% from 2014-2017.

The company’s inorganic strategies have provided enough fuel for overall growth. A number of acquisitions, Best Doctors, HealthiestYou, StatDoc and BetterHelp completed in past three years have led to an increase in membership and visits. Both these metrics have seen a CAGR of 42% and 70%, respectively from 2014-2017.

Investors also are confident about a decline in expenditure as the company has gradually started to realize leverage from the scale of its operations. In the fourth quarter of 2017, the company reported positive EBIDTA (first ever since its IPO) which shows that it is on track to achieve profitability.

Uniquely Positioned in a Burgeoning Industry

Teladoc is fast gaining ground in the rapidly growing telehealth services industry in the U.S., which has ample scope owing to increasing health care costs following inefficient care, duplication of services, significant waste and extreme variation in access, cost and quality of care.

Teladoc fills in this inefficiency by providing superior quality of care through a platform that caters to consumer demand and physician availability in real-time and in various modalities such as video, web, mobile and telephone. Moreover, the emergence of technology such as big data and analytics, cloud-based solutions, online video and mobile applications present the company with huge scope for growth.

Will the Stock Rally Further?

The company’s strong guidance for 2018 gives further positive insight into its performance going forward, which should support its stock price rally.

Teladoc expects net loss per share, based on 62.8 million weighted average shares outstanding, between $1.36 and $1.41 (lower than $1.93 in 2017); revenues in the range of $350 million to $360 million (up 55% at mid point); adjusted EBITDA between $7 million and $10 million (compared with negative EBIDTA of $70.4 million in 2017) and total U.S. paid membership within 22 million to 24 million.

Total visits are projected between 1.9 million and 2 million (up 33% year over year).

Zacks Rank and Stocks to Consider

Teladoc carries a Zacks Rank #3 (Hold). Investors interested in the Medical sector can consider some better-ranked stocks like Tivity Health, Inc. (NASDAQ:TVTY) , AMN Healthcare Services, Inc. (NYSE:AMN) and Medpace Holdings, Inc. (NASDAQ:MEDP) . While Tivity Health sports a Zacks Rank #1 (Strong Buy) the other two carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Tivity Health delivered positive surprises in each of the last four quarters, with an average beat of 21.8%.

AMN Healthcare Services surpassed estimates in three of the four reported quarters with an average positive surprise of 4.99%.

Medpace Holdings beat estimates in two of the four reported quarters with an average positive surprise of 7.42%.

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