What’s Teladoc’s Future after Acquisition of Livongo

As many people know, Teladoc Health’s stock price had fallen by more than 50% since it hit a record high on February 7, 2021.

What is behind the recent fall in stock price of Teladoc, which has been rumored to be a promising stock in the future?

Figure 1 shows Teladoc's Quarterly Stock Price Growth. 19% for 2019 Q2, 2% for 2019 Q3, 22% for 2019 Q4, 87% for 2020 Q1, 23% for 2020 Q2, 15% for 2020 Q3, -9% for 2020 Q4, -9% for 2021 Q1, and -9% for 2021 Q2.
Figure 1 Teladoc’s Quarterly Stock Price Growth

One reason for the stock price stagnation is a slowdown in Teladoc’s revenue growth. Fig. 2 shows the growth of Teladoc’s total revenue (QoQ). As shown in this figure, the growth of Teladoc’s total revenue has been declining since 2020 Q4. The background to this is that number of paid membership of Teladoc has already exceeded 50 million. Considering that the population of US citizens is about 330 million, we cannot expect the further significant increase in the number of the paid membership of Teladoc’s existing businesses. In fact, as shown in Fig. 3, the number of paid membership has already reached a plateau.

Figure 2 shows Quarterly Growth of Teladoc's Total Revenue. 1% for 2019 Q2, 6% for 2019 Q3, 13% for 2019 Q4, 16% for 2020 Q1, 33% for 2020 Q2, 20% for 2020 Q3, 33% for 2020 Q4, 18% for 2021 Q1, and 11% for 2021 Q2.
Figure 2 Quarterly Growth of Teladoc’s Total Revenue
Figure 3 shows Quarterly Growth of Teladoc's Membership & Access. As for US paid membership, 0% for 2019 Q2, 31% for 2019 Q3, 5% for 2019 Q4, 17% for 2020 Q1, 20% for 2020 Q2, 0% for 2020 Q3, 1% for 2020 Q4, -1% for 2021 Q1, 1% for 2021 Q2. As for US Visit Fee Only Access, -5% for 2019 Q2, 96% for 2019 Q3, 2% for 2019 Q4, -1% for 2020 Q1, 14% for 2020 Q2, 0% for 2020 Q3, -2% for 2020 Q4, 3% for 2021 Q1 and 0% for 2021 Q2. As for Chronic Care Enrollment, 10% for 2021 Q1, 9% for 2021 Q2.
Figure 3 Quarterly Growth of Teladoc’s Membership & Access

Another cause of Teladoc’s stock price stagnation is that Teladoc is currently recording a significant net loss. Due to acquisition such as Livongo, which was announced in 2020 Q2, Teladoc is currently recording a large amount of acquisition-related costs. As shown in Fig. 4, Teladoc’s net loss was drastically increased especially since 2020 Q4. Since the continuous recording of such net loss may lead to a decline in shareholders’ equity ratio as well as pressure on management in the future, it is desirable to reduce the amount of the net loss as soon as possible.

Figure 4 shows Teladoc's Quarterly Net Loss. 30150 thousands USD for 2019 Q1, 29324  thousands USD for 2019 Q2, 20346 thousands USD for 2019 Q3, 19044 thousands USD for 2019 Q4, 29063 thousands USD for 2020 Q1, 25682 thousands USD for 2020 Q2, 35884 thousands USD for 2020 Q3, 393967 thousands USD for 2020 Q4, 199649 thousands USD for 2021 Q1, and 133819 thousands USD for 2021 Q2.
Figure 4 Teladoc’s Quarterly Net Loss

But, has the future of Teladoc already been lost? Watanabe & Brothers’ Investment believes that Teladoc has continuous potential for future sustainable growth.

What should be noted is changes in number of Chronic Care Enrollment shown in Fig. 3. Although the number of the enrollment is still small, it has shown 9-10% growth since 2021 Q1 (QoQ). This shows that the acquired Livongo’s business is also growing steadily on the Teladoc’s platform. It is generally known that chronic diseases have a long treatment period and high dosage. For these reasons, we believe that increasing number of Teladoc’s Chronic Care Enrollment may significantly improve the profitability of Teladoc.

Finally, Teladoc’s Depreciation & Amortization, including the acquisition-related expenses, remains around 10% of the total revenue (Fig. 5). For this reason, we believe that the acquisition of Livongo etc. was not an excessive upfront investment, and it was an appropriate management decision to secure future growth of Teladoc in a situation where the growth potential of existing businesses is reaching a plateau. 

Figure 5 shows Teladoc's Depreciation & Amortization to Revenue Ratio. 9% for 2019 Q1, 8% for 2019 Q2, 8% for 2019 Q3, 7% for 2019 Q4, 6% for 2020 Q1, 5% for 2020 Q2, 5% for 2020 Q3, 10% for 2020 Q4, 12% for 2021 Q1, and 11% for 2021 Q2.
Figure 5 Teladoc’s Depreciation & Amortization to Revenue Ratio

Watanabe & Brothers’ Investment will continue to invest in Teladoc Health.

Teladoc-Stock-Analysis-Report

Teladoc Health, Inc. (NYSE: TDOC) Stock Chart

Important Notice 

  1. Watanabe & Brothers’ Investment is holding shares of Teladoc Health.
  2. This report is provided solely for informational purpose and not intended for the purpose of soliciting investment in, or as a recommendation to purchase or sell any specific products. 
  3. Any opinions or statements expressed in this report are based on the author’s personal and subjective views, and are not the official views of the organization to which the author belongs.  In addition, although we have done our best efforts in making accurate assessments on the original financial statements, we cannot guarantee any complete accuracy of this report. We do not guarantee either that any future forecasts referred to in this report will certainly be realized. Investment in listed stocks, ETFs, etc. should be carried out under the responsibility of each investor, and even if the investor who read this report suffers a loss due to investment activities, Watanabe & Brothers’  Investment is not responsible for any liability.
  4. This report was originally prepared in English, and translated into the other languages with plugin utilizing Google Translation API. We hereby notify that the translations are provided only for the sake of reference, and any opinions or statements in this report should be interpreted in original English. We ask any investors reading this report to refer to the original financial statements issued by the company.
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