Teladoc Stock rocketing more than 100% third-quarter 2020. Hovering above Earth’s atmosphere, NASA astronauts received healthcare treatment from the station more than 200 miles apart.
Cathy Wood has outperformed the investing legend Warren Buffett since 2014. The innovation-based ETF1 has beaten the old school value-based, Berkshire Hathaway. One of these Innovation theme members is Teladoc. A company that operates telemedicine, pioneered by NASA surgeon, Dr. Byron Brooks.
Here we try to dive deeper into Teladoc’s business advantages. Is it sustainable? Given its competitive advantages, is Teladoc a buy?
Is Teladoc Stock a Buy? In This Issue.
- Telemedicine Future
- Telemedicine Competition: Amazon, Google, Apple
- Teladoc Telemedicine Business Advantage
- Teladoc Stock a Buy? Final Verdict?
The first step is the prospect.
Despite being unprofitable2 Teladoc’s business generates more than 60% gross profit margin, with jaw-dropping revenue growth, 67% annualized. We are witnessing one of the most promising sectors, especially in the post-COVID world3.
Every prospect and potential is problem-driven. The United States with its aging demography has a GP4 shortage – States like Mississippi, New Mexico, and Louisiana have a physician to people ratio below the national standard. Another problem is America has more than 60 million people live in a rural area, making them difficult to get adequate medical care.
Then come pandemics that make the need for physical distancing and isolation to contain the spread of disease. In the COVID world, telemedicine shifts from the need to urgency.
Thus, for the United States, it is unsurprising if McKinsey & Company predict that “online” healthcare will reach $250 billion annually – 200 times of Teladoc revenue. With so much potential, room for growth, technological support, this delicious pie of course attracts others to taste.
Teladoc Telemedicine at a Glance.
Teladoc users will be able to see and consult with real doctors in their state. What we mean by real is certified doctors, certified internists, certified pediatricians, licensed family practitioners, and so on.
Teladoc deals with daily health problems like flu and cold, allergy, infection, and other non-deadly disease. Once you had visited, the doctor prescribes and submits it to the drugstore by the system. So it is time-efficient. If you are working far from home on daily basis, this service is for you. For children, you don’t have to pack them into your Nissan Rogue.
Teladoc Stock Analysis. The threat
Setting zoom or skype then get medical consultation is easy. So it isn’t difficult to replicate the Teladoc business model. Along with – as we have mentioned earlier – the juicy profit margin and the potential, telemedicine sector attract more competitor to participate.
Amwell, for instance, has a competitive price for its Urgent Care. $79 vs $75 Teladoc Everyday Care. Amwell also runs its TV monitor to perform medical care. In the near future, we might see a robot with a camera take care of the patient in the hospital bed. I think in this field, Amwell has more advantages. It is more integrated. But let’s explore more.
The Disruptor Gang
The avenger-level threat is actually when the real disruptor comes in. In March 2021, The e-commerce giant Amazon (NASDAQ: AMZN) announce that it will expand its Amazon care, a platform that works like Teladoc. Amazon care gives 24 hours access to Amazon employees to doctors and nurses. In its headquarters, Amazon embeds it with medicine delivery and blood check visit.
Considering its e-commerce and cloud infrastructure, Amazon will have scale and network effect advantages here. We will talk about cloud advantages later, we have Google (NASDAQ: GOOG) waiting.
Like Amazon, the search engine giant has used telemedicine services for its employee. Google integrates its services with One Medical (NASDAQ: ONEM), which offers only a $199 annual fee to access doctors online. And also like Amazon, Google will have a business advantage due to its AI, machine learning, and cloud infrastructure. Know what? both of them – Amazon and Google are the largest spenders for Research and Development. This is the real threat.
To make things worse, let me bring you, Apple. (NASDAQ: AAPL)
Even the industry experience the radical shifting to online, healthcare is healthcare. The medical team deal with real physic, not Gigabyte of data or chart. The data is just a tool, it is derived from the real condition of the patient. And, we have Apple with its devices around us. Apple wristwatch, iPhone, Airpod, iPad.
When Apple gets seriously about jumping on the telehealth hype bandwagon, they have already set. Apple devices become media that bridge us with the services.
With challenges ahead, is Teladoc doesn’t stand a chance?
Teladoc Stock Analysis. Business Advantage
What do we have here?
Honestly, it is difficult. One of the most crucial business advantages Teladoc has is Prime Mover Advantages. It is a NASA-inspired business -emulating telecare for astronauts. One prerequisite for Teledoc to keep leading in this industry is a database. If the New York-based telehealth company could build a massive database and create switching costs, so it could win. If they just setting zoom or skype, well, Jason Gorevic will see his market share will be robbed in foreseeable years.
How about Livongo Health?
Spoiler alert, it is good telemedicine stock to invest in. Due to its business model and competitive advantage, I will go to Livongo instead of Teladoc.
Livongo plays with data. It is a platform that allows the user to track health indicators at a glance: blood pressure, sugar levels, weight – and advise custom improvement programs to help the user cope with their problem. So it is beyond telemedicine, seems tele-prevention for us.
OK, back to ur database prerequisite for Teladoc. So, Livongo will play a role as a data feeder for Teladoc. Here we see Apple Teladoc’s similarity, they have business advantages in the term data collecting.
Is Teladoc Stock a Buy? Final Verdict
- Ok, telemedicine is hot, even hotter than Cathy Wood, but it comes with a problem. It has a low barrier for a new challenger. Every business could set zoom or skype.
- Tight competition in telemedicine doesn’t mean that the Teladoc lead will be dethroned. But certainly, it will erode profit margin.
- Healthcare in the future will be very data-dependent instead of experience-dependent. The day customer comes to the physician and tells his/her problem is over. With iPhone, apps, the Apple Watch, and other wearable devices, a doctor could detect the problem even before the patient realize it. So data collecting company like Livongo or Apple has advantages here. While companies with cloud technology like Google and Amazon will benefit from data processing by AI. Well, we aren’t sure actually.
- Predicting the winner is useless, and impossible. What we know is the upcoming competition is very cruel and it will strip Teladoc margin. Honestly, we prefer to hold Livongo as we said earlier.
- The most problem is the online version of existing businesses not always profitable, like Uber and Lyft. Do they need a massive network like Amazon to cover its overhead cost and turn a profit? So, why I have to invest here? For its prospect? The future is challenging. For its financial performance? Of course no.
I will end this issue with some remainder. Cool technology isn’t necessarily profitable or long-lasting. We didn’t know. This issue reemphasizes the importance of having sustainable business advantages. At the moment, enjoy your ride, go with Cathy.
To get more about disruptor issue, please read: https://investingdeck.com/disruptive-stock-analysis-of-tesla/