Investment Thesis

Teladoc Health (TDOC) recently published its Q3, featuring triple-digit growth. Despite this best-in-class growth and the prospective of adding another best-in-class company to its portfolio in Q4 with the Livongo Health (LVGO) acquisition, the market reacted pretty much flat to these results.

With such a quickly growing business, this presents an investment opportunity. Teladoc Health is the leader in virtual healthcare or telehealth. Given the current world environment, this could not be more of a relevant market. Nevertheless, this blending of healthcare and technology is still a nascent space and not just a transient phenomenon. Teladoc has already disclosed its expectation to continue growing at over 30% over the next several years, prior to any synergies.

In addition, the acquisition of Livongo Health will further bolster Teladoc’s leadership position in this emerging space. The combined company has even more opportunities for cross-selling, international expansion, etc.

As such, an investment in Teladoc Health may not be unlike other generational investments such as Amazon (AMZN) in e-commerce, Google (GOOG) (NASDAQ:GOOGL) in digital advertising, Facebook (FB) in social media, etc. Put differently, given this large greenfield opportunity likely ahead, one could likely ‘beat the market’ by simply being invested in this one disruptive/transformative company.

Q3 results

Teladoc’s accelerated momentum driven by COVID-19 continued in Q3.

  • Revenue: $289M, up 109% YoY
  • International revenue: $33M, up 20% YoY
  • U.S. members: 51.5M, 47% YoY
  • Total Visits: 2.84M, up 206% YoY (3x more)
  • Platform-Enabled Sessions: 1M, up 3x YoY
  • Q4 outlook: $294-304M, up ~95% YoY, up to 3M visits


Given that Teladoc is one of the prime COVID-19 stocks, it is worth separating temporary performance from the long-term opportunity.

As one indicator of continued momentum, Teladoc noted that the total number of visits increased sequentially despite the COVID-19-related visits in Q2, and also despite Q3 typically being a seasonally down quarter. The Q4 outlook also calls for further volume growth.

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Driving this sustainability, Teladoc ascribed some of this performance to acceleration in visits for non-infectious diseases, which represented 50% of volume, up from 33% last year. Not to be outdone, specialty care visits outpaced overall growth even more, as such visits grew 500% in the B2B channel.

In similar spirit, Teladoc’s ‘clinical scope’ will obviously take another leap forward with the addition of Livongo Health.

Internationally, Teladoc launched a partnership with Telefonica (which has 14 million customers in Spain for example) to offer virtual care to individuals and employees both B2B and D2C. Teladoc’s Nordic expansion also continues.

Teladoc also reported progress on its quite recent InTouch acquisition as part of its hospital channel, such as cross-sales, an expanding pipeline and integrated solutions. As another representative win:

“Johns Hopkins selected the Teladoc platform based on our steadfast commitment to quality, our position as the most comprehensive end-to-end solution in the industry and our innovative approach to advancing virtual care.”

With respect to 2021 momentum, Teladoc expects to close 2x the amount of bookings in Q4 compared to Q3, indicative of a strong pipeline. Teladoc also notes that two thirds of its sales are multiproduct, which the Livongo acquisition will further augment.

Livongo acquisition

Teladoc and Livongo Health announced the much-discussed merger/acquisition last quarter. While Teladoc could perhaps be described as the juggernaut in virtual care, especially Livongo investors saw Livongo as the upcoming, faster growing second player in this space.

Instead, the message by both companies was that while they were sort of on a path to become competitors, instead, they saw a much larger opportunity to leverage each others’ strengths to become the definite leader in this space as a combined entity.

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That view certainly has merit. Livongo does not have an international presence, which leads to the obvious opportunity to leverage Teladoc’s sales network. Additionally, both companies’ solutions are largely and highly complementary, which leads to further cross-sell synergies. Lastly, Teladoc’s triple-digit growth definitely does not give the indication that Livongo is being absorbed by some large, slow growing entity. Instead, both are high technology leaders in their subdomains.

So to that end, Teladoc also provided some updates on the pending acquisition, which should be completed in Q4. Teladoc noted that both companies’ integration teams are already making solid progress. Teladoc aims to create a unified go-to-market strategy to be able to offer one seamless, unified, fully integrated solution.

Given the technological focus of both companies, Teladoc in fact expects this integration to be smoother than its prior acquisitions. For example, Teladoc anticipates to apply Livongo’s data science to the combined data set of the former’s 10 million visits and the latter’s 750 million data points.

Lastly, Teladoc will create an integrated R&D organization.

“We’re incredibly excited to bring together the product innovation, data science, technological expertise and clinical excellence from across both companies under one roof. There’s a tremendous talent pool in both organizations. And we’re eager to continue investing in the development of innovative solutions to improve the lives of consumers and extend our leadership role in the virtual care marketplace.

The similar mission-driven cultures and shared vision of the 2 organizations has become apparent through this process.”

Teladoc also announced it has already achieved its first few major cross-sales.

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Additional information about the acquisition, such as the expected $121B TAM, can be found in this presentation.


Teladoc Health was already on a steady growth path prior to COVID-19, but like many other trends such as EdTech, CPaaS, work-from-home and others, has seen its growth amplified by the current environment. Teladoc could not be more of relevant company in these times as leader in the emerging domain of virtual care. This is not a transient opportunity, but will continue to grow for years to come.

This is evidenced by Teladoc’s sequential (and year-over-year) results. Nevertheless, although Teladoc has already rallied considerably in 2020, the stock did not move after another quarter of triple-digit growth.

In numbers, with expected revenue of $1 billion in 2020 and a market cap of about $18 billion, Teladoc trades at 18x P/S (although these stats may change post-acquisition). Other high growth names often trade for closer to 30x or even higher. This means that Teladoc presents a very reasonable investment entry point – unlike others high growth names in 2020 such as Twilio (TWLO), Pinterest (PINS), Fastly (FSLY) and Zoom (ZM), which have often rallied to far richer valuations despite lower growth.

Looking further out, the combined merger/acquisition of Livongo Health will make Teladoc even more of a juggernaut. Both are purposeful, fast growing companies, and their synergies will only amplify the opportunity ahead.

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.