Teladoc, Inc. TDOC gains traction from a strong first-quarter 2018 earnings release as well as a solid guidance. The stock hit a 52 week-high of $47.15 on Thursday. What Drives the Stock?
This telehealth service provider rides high on an inorganic growth profile, strong demand for its telehealth services, an increasing clientele base and a gradual march toward a breakeven profitability. All these factors have held stock in a good shape.
Since the release of the company’s results on May 1, 2018, shares have rallied 22%, outperforming the industry’s growth of 2%. In a year’s time, the sock has returned 60%, significantly higher than the
industry’s rise of 9.3%.
Let’s look at the catalysts for this bull run:
Investors note that the company is in growing stage and the consistent bottom-line losses over the past several quarters are a result of heavy expenditures incurred on marketing and substantial investments made to acquire new clients, build a proprietary network of healthcare providers and develop technology platform.
All the more encouraging is that these investments are reaping fruits, reflected by a strong increase in membership, visits and client base. These upsides have contributed to an upsurge in revenues at the company, which has witnessed a CAGR of 74% during the 2014-2017 period. The top line skyrocketed 109% year over year in the first quarter of 2018.
The company’s inorganic strategies have provided enough fuel to its overall growth. A number of acquisitions, namely Best Doctors, HealthiestYou, StatDoc and BetterHelp completed in the past three years have enhanced growth in membership and visits. Both metrics registered a CAGR of 42% and 70%, respectively, during the 2014-2017 phase. The two were also up 41% and 57%, each in the first quarter.
Investors are also confident about a decline in the expenditures with the company gradually starting to realize leverage from the scale of operations. In the fourth quarter of 2017, the company reported a positive EBIDTA (first ever since its IPO), which shows that it is on track to achieve a bottom-line profitability. Though the company posted a negative EBIDTA in first-quarter 2018, management has issued a positive guidance for adjusted EBIDTA in the second quarter and also for the full year.
Stock’s Unique Position in a Thriving Industry Teladoc is fast gaining ground in the rapidly growing telehealth services industry in the United States with ample scope for flourish owing to concerning health care cost following inefficient care, duplication of services, significant waste and extreme variation in access, cost and quality of care. Teladoc can address this inefficiency in care 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 via big data and analytics, cloud-based solutions, online video and mobile applications offers the company with huge opportunity for growth. Will the Stock Rally Further?
The company’s upbeat guidance for 2018 further lends a positive insight into its performance going forward, which in turn should support the stock price rise.
Zacks Rank and Stocks to Consider
Teladoc carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the medical space are Charles River Laboratories International, Inc.
CRL, Anthem Inc. ( ANTM Quick Quote ANTM - Free Report) and Humana Inc. HUM, each holding a Zacks Rank #2 (Buy).
Anthem beat estimates in each of the trailing four quarters with an average positive surprise of 7.22%.
Humana delivered positive surprises in each of the last four quarters with an average beat of 6.2%
Charles River Laboratories surpassed estimates in each of the preceding four quarters with an average positive surprise of 9.14%. You can see
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