Thesis
My thesis on Hudson Executive Investment Corporation/Talkspace (HEC) is simple - the company is underappreciated on a valuation basis for a forward revenue growth rate of 69% YoY, it offers a compelling value proposition with thousands of paying users, and it will continue to experience tailwinds after Covid. Although these may be dampened, I believe the entry point of $12/share still offers 20%+ upside.
Talkspace plays in this space with online therapy and has seen big tailwinds in 2020. It recently agreed to go public via a merger with HEC in mid-January 2021, and it has been underappreciated from the investment community.
I believe there is a space for digital companies to emerge in healthcare. I believe technology can allow for easier delivery of these services, which is the first layer of innovation. Talkspace fits into this wave of innovation.
Looking at Hims & Hers Health (HIMS) which is at $23/share, and comparing this investment which has a cash trust basis of $10/share, I take a weighted average probabilistic approach to my price target. I apply a 50/50 outcome on both to get to a price target of $18/share which implies ~30% upside from today's prices. I believe that 60%+ YoY revenue growth combined with the market opportunity and proven comparables of Teladoc (TDOC) and HIMS will result in a multiple re-rating of the business and an opportunity for investors today.
Value Proposition
Talkspace operates in a large market of mental health. There are thousands of unseen conditions that people experience, and Covid has intensified these. Talkspace markets its addressable market at over $500 billion, but as investors we must dissect these numbers. I would take 10% of this as addressable considering cost, willingness to use online platforms, accessibility, and other factors. That still results in a $50 billion opportunity.
