Despite posting dismal results since its IPO in June 2015, the stock price movement of Teladoc Inc. TDOC, a telehealth service provider, paints a different picture.
Stock price which is often significantly influenced by earnings is not replicated in case of Teladoc. In fact, the stock has witnessed a surge of 116% year to date, considerably outshining the industry’s growth of 5.7%.
What’s Supporting the Rally?
Investors are aware of the fact that the company is in inception phase and the bottom-line losses are a result of heavy expenditures incurred on marketing and substantial investments made to acquire new clients.
Further, the expenditures stemmed from build its proprietary network of healthcare providers and develop technology platform. However, the investors anticipate a decline in expenditures as the company has started to realize leverage from the scale of operations.
These investments are bearing fruits as evident by the company’s growing roster of clients, increasing membership, subscriptions and patients visit, all of which has culminated in top-line gain. Further, revenues for 2017 are expected at nearly $232 million up 87% year over year.
Its inorganic efforts are commendable. Since its inception in 2002, Teladoc has completed multiple acquisitions that have expanded distribution capabilities and broadened service offerings. Some of the most notable deals was the acquisition of HealthiestYou (completed last year), and Best Doctors (completed in July).
Strong earnings outlook from management have further fueled the stock’s rally. The company expects to achieve positive EBIDTA in the fourth quarter. This guidance is in line with the company’s commitment to achieve positive EBIDTA in two years of its IPO.
We anticipate the rally in the stock to continue given its leadership position in the growing telehealth industry. This can be attributed to rapid acceleration of telehealth demand in health care industry.
Zacks Rank and Stocks
Teladoc carries a Zacks Rank #3 (Hold). Investors interested in the Medical sector can consider some better-ranked stocks like Triple-S Management Corp. GTS, Wellcare Health Plans Inc WCG and Magellan Health, Inc. MGLN. All the stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Triple-S Management delivered positive surprises in two of the last four quarters, with an average beat of 74%.
Wellcare Health delivered positive surprises in the trailing four quarters with an average beat of 64.3%.
Magellan Health delivered positive surprises in three of the preceding four quarters, with an average beat of 0.9%.
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