Shares of Teledoc Health (TDOC) have continued their moved higher on Friday morning despite a downgrade from KeyBanc analyst Donald Hooker, who cited valuation.
SHARES UP 95% SINCE OCTOBER 30: On Thursday, KeyBanc analyst Donald Hooker Teledoc to Sector Weight from Overweight without a price target. The analyst cited valuation for the downgrade with the shares up 95% since the company reported its Q3 results on October 30, 2019. Teladoc is now trading at 12.2 times updated 2021 revenue estimate, inclusive of the acquisition of InTouch Health, Hooker told investors in a research note.
Hooker said his firm's models assume consolidated revenues of $757M in 2020 and $1B in 2021, implying legacy Teledoc growth of 25%+ in both periods, driven by the new contract with UnitedHealth Group (UNH), the rollout in the Medicare Advantage space, and synergies from acquisitions. His model also includes revenue of $51M in 2020 and $115M in 2021 from the pending acquisition of InTouch Health, the analyst noted. He estimated that his revenue outlook will convert to adjusted EBITDA of $67M in 2020 and $114M in 2021, cautiously assuming breakeven profitability at InTouch Health.
The analyst also said that there has been "significant" interest in the new UnitedHealth contract as well as the expansion into the Medicare Advantage space, and sees Teledoc's MA membership potentially doubling or even tripling in 2021.
RECENT EARNINGS: Earlier this week, Teledoc posted better than expected results for its fiscal fourth quarter, with a loss per share of (26c) and revenue of $156.5M exceeding analysts' consensus estimates. The company guided the current quarter loss per share of (37c)-(34c) on revenue of $169M-$172M against analysts' estimates of (36c) and $152.95M, respectively, with a fiscal 2020 loss of ($1.19)-($1.06) on revenue of $695M-$710M against analysts' estimates of ($1.19) and $692.86M, respectively.
Following the quarterly earnings report, analysts at several firms, including JPMorgan, Credit Suisse, RBC Capital and Piper Sandler, raised their respective price targets for Teledoc, with Piper Sandler's Sean Wiedland telling investors that the quarter's beat and raise is "significant" because it signals Teladoc can simultaneously improve utilization and profitability. JPMorgan analyst Lisa Gill pointed to "significant runway" in the telehealth market and believes Teladoc is "very well positioned as the only comprehensive virtual care delivery solution."
CORONAVIRUS: Teladoc, a multinational telemedicine and virtual healthcare company based in the United States, has seen its shares spike following a Centers for Disease Control and Prevention official saying that communities may need to increase the use of telehealth tools if the coronavirus continues to spread inside the U.S. On its quarterly earnings conference call, Teledoc said it sees an opportunity to bring in new members amid the coronavirus outbreak, commenting that "We do benefit...by bringing new people into becoming active users." Gorevic added that "It's still too early to qualify the impact that the outbreak could have on our business," but noted that "We'll continue to play an active role depending on which of those scenarios plays out."
PRICE ACTION: In morning trading, shares of Teledoc Health are up about 1% to $136.68.
