We came across a long thesis on Teladoc Health Inc (NYSE:TDOC) on ValueInvestorsClub by kismet. In this article we will summarize the bulls’ thesis on TDOC. The company’s shares were trading at $7.11 when this thesis was published, vs. closing price of $9.52 on Jan 3rd.
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Teladoc Health Inc (NYSE:TDOC) delivers virtual healthcare through a telehealth platform that enables on-demand medical care via mobile devices, the internet, video, and phone, along with remote monitoring programs for chronic condition management. Operating through its Health Integrated Care and BetterHelp segments, the company generates most of its revenue from subscription-based access fees, supplemented by visit fees and equipment sales or rentals to hospital systems. Initially focused on partnerships with employers, health plans, and health systems, Teladoc has since expanded its service offerings and begun marketing directly to consumers.
Teladoc Health Inc (NYSE:TDOC) was favored during the COVID pandemic and its stock price experienced rapid growth in 2020. In the subsequent years, a history of expensive acquisitions, unbridled expense growth under unrealistic long-term growth expectations induced by the COVID mania, a maturing and saturated core domestic virtual care business, tough competition and low ROAS in BetterHelp, as well as other factors, have led to a stock price decline from a peak of ~$300 in 2020 to less than $10 at the time of the writeup. Despite all this, the author believes that the bear thesis has already played out and TDOC reached a trough; he sees that TDOC will be one of the few survivors in the telehealth space, as its scale and profitability should enable it to continue to be a one-stop shop for health insurers and employers.
The author’s bull thesis is focused on several catalysts that could drive the stock price higher from the current beaten down levels. First, the author sees significant potential upside under an M&A scenario – if TDOC is acquired by either a Private Equity player or some strategic public acquirer. Second, a successful and more rapid transition to a B2B model for BetterHelp could help the company improve its cost structure and boost growth to mid-single digits. The author believes that a potential activist investor could help speed up the above-mentioned improvement processes and sees the stock price doubling under a base case scenario, while the more optimistic scenario implies a 5x in the stock price from the current level.
While we acknowledge the potential of TDOC as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than TDOC but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.
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