This healthcare tech company’s shares were recently initiated at Berenberg to ‘Buy’ and upgraded at Craig-Hallum to ‘Buy’.
Teladoc (TDOC)
From Pivotal Point
In 2002, Dr. Byron Brooks, an ex-NASA surgeon, and Michael Gorton, launched Teladoc (TDOC). The Dallas company had a simple business plan: Use advances in networking technology to provide on-demand remote medical care.
The foundation was strong. For decades, NASA invested heavily in new network protocols. It reached out to academics and business leaders to push open standards. And the internet revolution accelerated the pace of information technology development.
Teladoc provided access to qualified physicians 24 hours per day, for non-emergency issues. Patients sign-in with their computer and they are instantly connected with a state-licensed doctor. It’s like Uber for healthcare. There is very little friction.
The appeal resonated with patients and employers. Teladoc formally launched at a 2005 consumer healthcare conference. By 2007, it had 1 million members. The service was especially popular with large corporate clients, who offered Teladoc as a benefit to employees.
In 2015, the company issued shares to the public in a much-anticipated IPO. The stock vaulted 50% on the opening day.
Jason Gorevic, chief executive officer, has been on a growth binge. The company is ferociously gobbling up telemedicine mind and market share. In January, Teladoc acquired Compile Inc., a provider of behavioral health services. In June, Stat Health Services Inc., a leading competitor, was folded-in.
By 2016, Zacks Equity Research noted Teladoc had 75% market share in the U.S. It had 7,500 enterprise clients, and 220 Fortune 1000 companies under contract.
In 2017 sales grew 89.4% to $233.3 million. Best of all, telemedicine is still largely unexploited.
Doctors can use the technology to provide quality care to resource-constrained environments, such as rural locations. Also, it is ideal for reviewing lab results, follow-up visits and managing chronic care. And financially, physicians are able to make incremental income while reducing overhead costs, such as office expenses.
Patients benefit from seeing doctors on their terms, without delay. Today, reaching a doctor is as simple as opening a smartphone application.
Health insurance companies benefit from reduced care delivery costs and avoiding the costly escalation of illnesses.
Meanwhile, a government program like Medicare is a logical candidate for telemedicine. It would provide patients with better service, and it would save billions in emergency room visits. There are 1.25 billion ambulatory visits every year. In 2015, Gorevic estimated that 25% could be covered by Teladoc.
What Teladoc is doing is not rocket science. It’s better. The company took technology developed by NASA and found a real-world application that solves important problems.
The stock is up 89% in 2018. Despite the gains, the market capitalization is still only $4.1 billion. Given the opportunity, that looks like a bargain.
Jon Markman, Pivotal Point, issues@e.moneyandmarkets.com, 1-800-291-8545, July 18, 2018