Buy the dip on Teladoc Health?
Teladoc Health’s stock is getting crushed after-hours, down as much as 21%. The company just released its 4th quarter and full year earnings report, meeting expectations on earnings but missing on their 2019 guidance.
If you’ve read any of my posts before, you know I don’t pay much attention to analyst estimates. I believe times like these are great for opportunistic investors who want to take advantage of an irrational market.
Here are the highlights from the report:
Full-year sales of $418 million, up 79% Y/Y.
Organic revenue growth of 36%. This takes out the sales boost from the Advanced Medical acquisition.
Full-year gross margin of 69%, down 4% Y/Y.
Total visits up 80% Y/Y.
Guided for $535-$545 million in revenue for 2019.
This report looks solid, but not great, and probably doesn’t warrant a 20% price drop. If we look closely at the report, international subscription growth grew 300% Y/Y, an impressive number as Teladoc tries to expand its services worldwide. A lot of the international growth probably comes from Advanced Medical, but those are still great numbers nonetheless.
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So buy the Dip?
I’m still a heavy believer in Teladoc’s long-term growth potential and think this guidance “miss” could be a potential entry point for anyone bullish on the telehealth industry. The most important number for investors is total visits, which grew an astounding 80% this year. This high growth needs to continue if Teladoc wants to be a formidable player in the healthcare industry.
The downside of this stock is the hefty valuation, a P/S ratio in the 8-12 range, and a ton of volatility. However, I believe there are a few big tailwinds, like 5G and mobile adoption, that can help Teladoc grow for the next decade and beyond.
Disclosure: the author is not a financial adviser, and may have an interest in the companies discussed.