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Teladoc Health: Just What The Doctor Ordered

Aug. 05, 2018 2:21 AM ETTeladoc Health, Inc. (TDOC)29 Comments
WG Investment Research profile picture
WG Investment Research


  • Teladoc Health recently reported solid Q2 2018 operating results that were well-received by the market.
  • This telehealth company has promising long-term business prospects and its backdrop seems to be improving by the day.
  • I am long Teladoc Health and I plan to add to my position in the near future.
  • This idea was first discussed with members of my private investing community, Going Long With W.G.. To get an exclusive 'first look' at my best ideas, start your free trial today >>

Teladoc Health (NYSE:TDOC) is shaking up an industry that needs disrupted. The company's telehealth platform and other related services are garnering a ton of buzz (and usage) in the healthcare industry and I believe that Teladoc is just getting started. The company's stock performance is telling the same story, as TDOC shares have outperformed the S&P 500 by a wide margin over the last year.

I posted "Teladoc Is Worth A Look" in early April 2018 and shares have already ticked higher (shares were in the lower $40 range) but, in my opinion, investors with a long-term perspective should seriously consider continuing to accumulate TDOC shares even in the $60 range.

The Strong Q2 2018 Operating Results - Just What The Doctor Ordered

On August 1, 2018, Teladoc reported Q2 2018 financial results that missed on the bottom-line but that beat the consensus top-line estimate. The company reported an adjusted Q2 2018 loss per share of $0.40 (missed by $0.03) on revenue of $94.56M (beat by $2.19M), which compares favorably to the results reported in the same period of the prior year. The following were the highlights from the quarter:

  • Total revenue of $94.6M, which is growth of 112% when compared to the prior period.
  • Total paid memberships of 22.5M (increase of 48% YoY).
  • Total visits of 533k (increase of 72% YoY).
  • Net loss of $0.40 for Q2 2018 compared to a net loss of $0.28 for Q2 2017.
  • EBITDA was $(10.1)M for Q2 2018 compared to $(11.8)M reported for the same period of the prior year.

Teladoc's Q2 2018 revenue was positively impacted by the Best Doctors ($26M) and Advance Medical ($6M) acquisitions but organic revenue growth for the quarter was still an impressive 39%.

Management also updated their full-year 2018 guidance:

Source: Q2

This article was written by

WG Investment Research profile picture
Our President and CIO is a CPA with experience in public accounting and the financial services industry. He earned his Master of Accountancy degree in 2008 and his B.S. in Business Management in 2007. He is also a Level III CFA candidate. He has been intrigued by the market from the start. Over the years, he has learned that long-term investing is a discipline that, if followed, will help contribute to building lasting wealth. As such, most of our articles will be about the investments that we plan to hold for at least 3 to 5 years, as long as the company's story does not change. As a Seeking Alpha contributor, our main goal is to write about the companies that are key to our portfolio with the hope of promoting discussion (for or against the investment) from others within the SA community.Please visit our website for more information about W.G. Investment Research LLC.

Analyst’s Disclosure: I am/we are long TDOC. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (29)

how do yall value this stock?
11 Aug. 2018
Great insight into the short thesis. Ive been mystfyied as to why they can't see what is so obvious to me. Ive never used Teladoc but my daughter's pediatrician-is a family friend and will face time with us when we have any questions about our daughter's well being. The convenience that this service offers for mundane heath issues is undeniable. what percentage of the population visits the doctor for a rash, pink eye etc.My sister is a psychologist and she routinely does phone sessions with her patients. This stock has a long runway..
Great article.Thank you Long TDOC.
WG Investment Research profile picture
Appreciate the kind words, grandam.

WG Investment Research profile picture
$CVS will offer virtual visits via $TDOC www.cnbc.com/...|twitter&par=sharebar

Great news.

Thanks for this interesting idea.
WG Investment Research profile picture
No problem!

GDPPP profile picture
WG Investment Research, thanks for the article on TDOC. This stock is on my watch list right now. Do you know why it has such a high short interest currently?
WG Investment Research profile picture
No problem, GDPPP. I haven't heard (or read) anything specific on $TDOC's short interest. Do you have any insight?

GDPPP profile picture
No I don't. Asked a few readers and another author here on SA, but no-one replied.
genoa93 profile picture
at 07 13 the percent of float short was 34,29%. Me too asked about this topic, but no thoughts from anyone
namahsivaya profile picture
TDOC has a smaller peer in the telepsychiatry arena MYND. one day will be a target as TDOC needs to keep expanding offerings and telemedicine adoption for future growth
miketoht profile picture
Thanks for the info about MYnd. I researched it and just bought my initial position. They have just started Getting into nursing homes which will boost their numbers in upcoming quarters.
miketoht profile picture
Rarely mentioned is the HUGE future impact on the vastly underserved mental health services market. There is a shortage of mental heath practitioners in many areas of the country. TDOC can help meet this unmet need.

Here in Wilmington NC a family member needs a child care mental health counselor. There is only one with a six plus wait for an appointment. Yes, they will follow up with their insurance provider about Tele coverage.

I am a TDOC shareholder and am buying more for my grandkids.
WG Investment Research profile picture
"Rarely mentioned is the HUGE future impact on the vastly underserved mental health services market. There is a shortage of mental heath practitioners in many areas of the country. TDOC can help meet this unmet need."

This is a great point, miketoht! I agree. Thanks for sharing.

zito profile picture
I'm long TDOC and really think the addition of Medicare patients will be a big plus in 2019.
I'm concerned about the lack of paid member growth: 22.5M actual for Q2 and year end estimate 23-24M. Is this normal seasonality?
WG Investment Research profile picture

I questioned the same thing (paid member growth) - I plan to dig deeper into this so I will keep you updated with what I find. On the other hand, the paid members are utilizing the company's services more so it is not yet a significant concern, IMHO.

Remember, paid member growth does not include visit fee only access. Think Tricare, Blue Cross/Shield, Aetna employees, etc. The government elected to do a slower roll out than originally planned, so when it fully rolls out there should be over 9 million 'lifes' eligable for access. Also international was not included I dont believe, which in the 1Q was 15% of revenues. Also remember that the 1st quarter included the flu season, which is why you may have noticed a decline in paid US membership visits in the 2nd quarter.

If you listen to the 2Q CC, the ulilization rates are increasing and expected to keep increasing. They raised quidance for the year also. So I really dont see paid member growth to be a major concern. Something to keep an eye on for sure, but not a concern presently.
WG Investment Research profile picture
Great points, TryingVeryHard.

Some related comments from conference call (seekingalpha.com/...):
-Strong visit volume of approximately 533,000 total visits in the quarter, which represented growth of 72%. U.S. paid membership of 22.5 million members, representing growth of 48% and our average per member per month was $1 compared to $0.63 for the same period last year, representing a 58% increase. Mark will provide more details on our strong financial results, but first before that I’d like to focus on a few key developments for the company.
-On the positive side from the Federal Government, we're very pleased with the announcement from CMS two weeks ago regarding their payment policies for telehealth. CMS announced that they would begin paying for telehealth services and virtual visits for the Medicare fee for service population.

While we were expecting this for the Medicare Advantage plans. The inclusion of telehealth and Medicare’s fee per service and the physician fee schedule came early than we anticipated. This is a meaningful step forward in CMS’s increasing supportive telehealth as a valuable component of the delivery system and a way to improve the quality and access to care for seniors.
-As of the end of the second quarter, U.S. paid members totaled 22.5 million members, an increase of 48% compared to last year after adjusting for 5.2 million Aetna and Amerigroup lives, which are now classified as visits the only individuals. As a reminder, our definition of members includes just U.S. paid members that are associated with a PEPM or PMPM or paid U.S. membership. And under this definition, membership totals do not include visit fee only access individuals.

At the end of Q2, we had approximately 9.6 million individuals with visit fee only access to our services including those individuals from the Blue Cross Blue Shield Federal Employee Program and Aetna's fully insured population.
-Moving on utilization, which we calculate as total visits divided Teladoc’s paid U.S. membership for those members with access to our general medical services. During the second quarter, Teladoc completed 533,000 visits, that’s an increase of 72% from the year ago period. This represents an annualized utilization rate of 8% in the quarter and approximately 200 basis point from the 6.1% we experienced in the second quarter of 2017.

In terms of visits, we segment them into visits from U.S. paid memberships and visits from visit fee only access. Visits from U.S. paid membership totaled approximately 436,000 visits. Going one level deeper into the U.S. paid membership visits, 218,000 or 44% of these visits were paid, while the remaining 277,000 visits were delivered under our visits included contracts. In addition to those 277,000 visits, we also completed 36,000 visits for individual with the visit fee only access.
bambootiger42 profile picture
I have used them twice on out of town trips and great service and "lifesaver" both times. Invested for these reasons and LONG TDOC.
WG Investment Research profile picture

I have heard this same thing from others that have used $TDOC's service. Thanks for sharing your insights.

hermanbrut profile picture
TDOC is also on the Fools Rule Breakers list.
WG Investment Research profile picture
The Fools are smart, IMHO. Hopefully they are right on this call.

Great article!
WG Investment Research profile picture
Appreciate the kind words, Almost a noob!

It looks to me that the Teladoc buisiness gains more and more traction and that the management is doing a lot of things right. This stock can gro fro many many years to come.
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