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Teladoc (TDOC) Soars 193% in a Year: What's Behind the Rally?

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Teladoc Health, Inc. (TDOC - Free Report) is well-poised for growth on the back of improving revenues, which is driven by the increased demand for its telehealth services.

Shares of this Zacks Rank #3 (Hold) healthcare provider have soared 193.1% in a year against the industry’s decline of 19.2%.

The company has a trailing four-quarter positive earnings surprise of 1.73%, on average.

What’s Favoring Teladoc?

This healthcare provider continues to benefit from strong revenues, which have witnessed a CAGR of 66.3% in the past five years (2014-2019).The momentum continued in first-quarter 2020, wherein the top line improved 41% year over year. The upside can primarily be attributed to increase in membership and patient visits. Based on such solid trends, the company anticipated revenues between $800 million to $825 million for 2020, up from prior estimate of $695 million and $710 million. Likewise, it also estimates increase in membership and patient visits in this year. Increased guidance is likely to raise investor optimism on the stock.

Moreover, Teladoc is well-poised to benefit from the increased telehealth visits, which are outweighing its membership growth. It is to be noted that if there is an industry that has likely gained from the COVID-19 fallout, it is the telehealth industry. With observance of stringent social-distancing measures on account of the novel coronavirus, patients have been left with telehealth services as the only feasible option to seek medical help. This, in turn, enhances demand for telehealth market eventually. Per research reports by Arizton, the U.S. telehealth market is projected to witness a CAGR of 30% during the 2019-2025 forecast period. Yet another report by Global Market Insights Inc. forecast the U.S. telemedicine market to cross a valuation of $64 billion by 2025.

Furthermore, Teladoc has made a number of strategic buyouts, which have expanded distribution capabilities, broadened service offerings and enhanced global footprint. These steps have boosted the company’s inorganic growth. In January this year, it announced to acquisition of InTouch Health that provides enterprise telehealth solutions for hospitals and health systems. This deal will make Teladoc a leading provider of virtual care for health systems given its wide range of healthcare solutions from critical to chronic to everyday care.

Additionally, the company’s balance sheet continues to impress. As of Mar 31, 2020 Teladoc's cash and cash equivalents came in at $507.9 million, while debt was $447.2 million. This highlights that the company has sufficient cash reserves to meet its debt obligations. Further, its long-term debt to capital ratio of 30.9% remains lower than the industry’s figure of 42.4%, which sounds good.

Hence, we believe that the company’s strong fundamentals are likely to sustain momentum in the long run.

Stocks to Consider

Some better-ranked stocks in the medical space are Acorda Therapeutics, Inc. (ACOR - Free Report) , GenMark Diagnostics, Inc. (GNMK - Free Report) and Regeneron Pharmaceuticals, Inc. (REGN - Free Report) . While GenMark sports a Zacks Rank #1 (Strong Buy), Acorda and Regeneron Pharmaceuticals carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Acorda, GenMark and Regeneron Pharmaceuticals have a trailing four-quarter positive earnings surprise of 18.9%, 13.49% and 10.08%, respectively.

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