3. Talkspace, Inc. (NYSE:TALK)
Number of Hedge Fund Holders: 27
Talkspace Inc. (NYSE:TALK) is a behavioral healthcare company that provides affordable and accessible mental healthcare services through its online platform across the United States. The company connects psychiatrists and psychologists with individuals and enterprises, through text, audio, and video-based psychotherapy.
Talkspace, Inc. operates through three segments, namely the payer segment, DTE (Direct to Enterprise) segment, and the individual subscriber (consumer) segment. Within the payer segment, the company partners with major US health insurance providers such as Aetna, Cigna, and Optum to provide services to insured members of these insurance plans. Under the DTE segment, the company contracts directly with organizations such as enterprises, education organizations, and government entities to provide online mental health services to members of these organizations. Some of the major clients in the DTE segment include Google, the University of Kentucky, and the New York City Department of Health and Mental Hygiene. Lastly, the consumer segment of the company includes individual subscribers from various socioeconomic backgrounds, genders, and races, who pay out-of-pocket to get mental health services.
Talkspace Inc. (NYSE:TALK) was held by 27 hedge funds at the end of Q1 2024, up from 19 hedge funds during the previous quarter, with stakes worth of $106.06 million. The company posted a successful first quarter this year, with revenue increasing 36% year over year to $45.4 million. Revenue growth was mainly driven by a 92% increase in the payer category and a 14% increase in DTE revenue. The company reported an adjusted EBITDA of $0.8 million, making Q1 2024, the first quarter of adjusted EBITDA profitability in the 13-year history of Talkspace Inc. (NYSE:TALK).
Talkspace is capitalizing on the growing need for affordable mental health services through its strategic partnerships and is expanding its provider network. The company has launched its health collective marketplace, a growing suite of whole health digital providers and services, and has already partnered with healthcare providers and wearable technology companies including Aura, Evernow, Conceive and Fit On.
While strategic partnerships are lucrative, what’s more noteworthy is the company’s effort to jump into new verticals. With substantial growth in the payer segment, the company is now aiming to expand its covered lives thereby increasing its capture rate and utilization. Talkspace Inc. expects to expand its network with Medicare, a segment with an opportunity of more than 65 million lives. The company will go live in multiple states within the next few months adding more than 10 million lives to its coverage at launch and will further expand its network to all 50 states later this year.
Is Talkspace Inc. (NYSE:TALK) a good investment, given that its consumer segment took a hit?
Yes, the consumer segment revenue of the company took a hit and the revenue declined by 29% year over year during the quarter. However, it was all in line with the company’s strategic focus of increasing its covered lives. It is important to elaborate on what the covered lives mean for the company. For Talkspace, “covered lives” means individuals who are eligible to receive mental health services through their insurance plans, i.e. Employee Assistance Programs (EAPs), or other benefit programs. So, the decrease in consumer revenue stemmed from the increase in lives covered during the previous quarter making more members qualify for the coverage, thus reducing the need for them to pay out of pocket.
For risk-tolerant investors, Talkspace Inc. presents an attractive opportunity. The company has vast coverage with over 131 million Americans having access to its services The company’s full-year guidance is promising, with revenue expected to be between $185 million and $195 million and adjusted EBITDA projected between $4 million and $8 million. Analysts hold a consensus Buy opinion on the stock and their 1-year median price target of $4 represents an upside of 74% from current levels.
