We came across a bullish thesis on Teladoc Health, Inc. (NYSE:TDOC) on Substack by Unemployed Value Degen. In this article, we will summarize the bulls’ thesis on TDOC. Teladoc Health, Inc. (NYSE:TDOC)’s share was trading at $9.52 as of Jan 2nd.
A nurse in a telehealth platform talking with a patient on video call for consultation.
Teledoc Health (NYSE:TDOC) presents a fascinating case within the small-cap software space, combining immense potential with operational uncertainties. Despite its position as a market leader in virtual healthcare, TDOC’s valuation has plummeted from a peak market capitalization of $44.69 billion in 2021 to just $1.53 billion, even as its revenue has doubled over the same period. This disconnect highlights the market’s skepticism about TDOC’s growth strategy and operational execution. However, its durable moat, stemming from 93.9 million enrolled members and extensive B2B partnerships, underscores the company’s potential for a dramatic turnaround.
TDOC’s primary opportunity lies in leveraging its vast member base through cross-selling initiatives, particularly its Chronic Care Program. Currently serving 1.18 million members, this segment represents only 15% of its potential, providing a significant runway for growth. Additionally, mental health services, which delivered 1 million appointments last year, are emerging as another key revenue driver. By bundling its offerings and appealing to employers with cost-effective solutions, TDOC is building a competitive edge over rivals like Talkspace. Its acquisition of Livongo for $18 billion, though initially criticized, now offers untapped value. Livongo alone could be worth significantly more than TDOC’s current market cap if strategically monetized.
International expansion also provides a growth vector, with $100 million of last quarter’s $640 million revenue originating outside the U.S. Moreover, niche segments like hospital monitoring systems using predictive analytics further illustrate TDOC’s extensive addressable market. However, questions about management execution linger. The new CEO, Chuck Divita, has shown humility and a strong operational background, but it remains to be seen whether he can pivot TDOC from a slow-moving healthcare entity to a dynamic tech-driven company.
Artificial Intelligence is another wildcard. While TDOC hasn’t heavily emphasized AI in its strategy, its proprietary dataset and regulatory positioning may insulate it from disruption while enabling efficiency gains. Regulatory reform, particularly under a Trump administration potentially targeting healthcare inefficiencies, poses a greater near-term risk.
Given its undervaluation and competitive advantages, TDOC could be an attractive acquisition target, particularly in a favorable M&A environment. If management executes effectively, TDOC has the potential to grow its revenue to $5 billion in the near term, with a rerating to a price-to-sales multiple closer to its historical average of 5.0x. This scenario would imply a market capitalization exceeding $25 billion, offering a compelling upside for long-term investors. The coming years will be pivotal, with Divita’s leadership playing a decisive role in determining TDOC’s trajectory.
Teladoc Health, Inc. (NYSE:TDOC) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 32 hedge fund portfolios held TDOC at the end of the third quarter which was 35 in the previous quarter. While we acknowledge the risk and 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 timeframe. 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.